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CFPB Alleges Block Is ‘Slow-Walking’ Cash App Investigation (2)

Aug. 19, 2022, 2:26 PMUpdated: Aug. 19, 2022, 6:05 PM

The Consumer Financial Protection Bureau asked a federal judge to force Block Inc. to fully comply with a pair of investigative demands related to its Cash App payments tool.

The CFPB’s petition, filed Thursday, urged the US District Court for the Northern District of California to enforce a civil investigative demand. Block, the digital payments company led by CEO Jack Dorsey, has yet to provide all of the documents and data the CFPB requested in August 2020 and August 2021, the consumer finance industry regulator alleged in its petition.

The investigation is looking into Cash App’s handling of complaints and disputes. The San Francisco-based company disclosed the investigation in a March 2022 securities filing.

“The Bureau cannot sit back while its investigation is stymied by Block’s slow-walking,” the CFPB’s petition said.

Block is “disappointed” that the CFPB elected to file its petition despite the company’s “regular communication” and cooperation, a Block spokesperson said in an email.

“We have been waiting weeks for the CFPB to respond to our most recent communication, which outlined the scope of our prior responses, set-forth a proposed timeline for the remainder of the production of materials, and posed additional clarifying questions for the bureau,” the spokesperson said.

The CFPB didn’t immediately responded to a request for comment.

The CFPB said that it has met with Block’s counsel several times to go over the document and data requests and has agreed to both modify what it’s looking for and extend deadlines.

But Block still failed to provide documents related to six specific questions, the CFPB said in its petition.

Block has never filed a formal petition at the CFPB to modify or set aside the investigative demands, the bureau said. Such a petition would require a review by the CFPB of the demand.

The date set for full compliance for the 2020 investigative demand was Oct. 14, 2020, according to the petition. The 2021 demand’s compliance deadline was Dec. 5, 2021 following consultations with Block, it said.

Block has yet to provide any firm dates by which it will produce relevant documents and data, instead saying that it would “endeavor” or “hope” to provide responses to requests, the CFPB said.

In one instance, Block failed to propose production dates for documents, instead saying they were “to be determined” or “TBD,” the CFPB’s petition said.

That was a clear invitation for the CFPB to go to court to mandate document production, said Jenny Lee, a former CFPB enforcement attorney.

“Not engaging meaningfully in the meet and confers is an easy justification for the staff to pursue the lawsuit,” Lee, now a partner at ArentFox Schiff LLP, said.

To date, Block has only provided some 900 documents to both investigative demands, the CFPB said. Other firms that are subject to the CFPB’s investigation on this topic have produced “thousands or even tens of thousands of documents without undue delay,” the agency said.

The CFPB’s petition shows that companies will have to more completely engage with the bureau on investigative demands, rather than think they can get away with partial disclosures, Lee said.

“You can’t assume that any partial productions are going to score brownie points,” she said.

The case is CFPB v. Block Inc., N.D. Cal., No. 3:22-mc-80214, Petition to Enforce Civil Investigative Demand 8/18/22.

(Updated with Block's comments in paragraphs 5 and 6 and additional reporting throughout)

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editors responsible for this story: Maria Chutchian at mchutchian@bloombergindustry.com; Roger Yu at ryu@bloomberglaw.com