Americans are holding ‘billions of dollars’ in uninsured accounts, federal agency warns. Here’s what you can do about it.
The Consumer Financial Protection Bureau issued a warning Thursday that “billions of dollars” stored in these accounts may not be safe in the event of financial distress.
Use of non-bank payment apps such as PayPal PYPL , Venmo, and Cash App have rapidly grown in the past few years, but don’t provide the same protection as funds deposited with banks and credit unions protected by federal deposit insurance through the Federal Deposit Insurance Corporation or National Credit Union Administration, the CFPB said.
“When users of these digital apps receive payments, the funds are not usually swept automatically to the recipient’s linked bank or credit union account,” the federal agency focused on consumer protection said. “Companies hold and invest the funds. These activities are not typically subjected to the same oversight that an insured bank or credit union faces.” — Ted Rossman, senior industry analyst at Bankrate.com PayPay, Venmo and CashApp did not immediately return a request for comment.
Funds held in these peer-to-peer payments apps are often not insured — unless customers meet specific requirements such as carrying the app’s debit card or using direct deposit or buying crypto with PayPal, said Ted Rossman, senior industry analyst at Bankrate.com. “I wouldn’t take the risk with a significant amount of money.”
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