Mobile banking — what a relief, right? No more figuring out how to pay someone back with cash or IOUs or money orders or however we used to do it. But peer-to-peer money transfers are ripe for scams, and one in particular is becoming more and more common.
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Chargebacks are meant to settle disputes, but they're also a good way to enact fraud. These apps should have failsafes to protect customers from bad-faith chargebacks, but Venmo owner PayPal just got socked with a Federal Trade Commission settlement about just that. It's one more reasons most peer-to-peer payment apps focus on moving money between people you know and trust. In fact, exchanging money for goods and services is also usually against the apps' terms of service, except in special cases.
The short version is that scammers would buy an item on auction or on sale, sometimes in the thousands of dollars, and then do a chargeback before the money went through, but after the item had shipped or changed hands. Sellers had little recourse, and scammers had a valuable item to capitalize on.
PayPal says that the Venmo security loophole that enabled the scam has been closed. But check your app settings, just to be sure: One factor in the Venmo settlement was that user privacy was an opt-in feature, rather than the default. If you're not sure what you're looking at, get in touch with customer support. Your money is worth it.
