Venmo Class Action Lawsuit, Users Hit With Hidden Credit Card Cash Advance Fees New Class Action Investigation Targets Banks Charging Illegal Transaction Costs
What Are the Current Venmo Class Action Lawsuits About?
Two active class action investigations are targeting Venmo in January 2026: one focuses on credit card companies charging unexpected “cash advance fees” when users send money through Venmo (despite these transactions not being traditional cash advances), and another alleges Venmo violated Washington State’s Commercial Electronic Mail Act by incentivizing users to send unsolicited referral texts promising $500 per illegal message. Additionally, a 2022 federal lawsuit alleging Venmo fails to reimburse fraud victims remains pending in California court, with thousands of users reporting frozen accounts and withheld funds totaling millions of dollars.
Here’s the punch: you thought you were just splitting dinner or paying your roommate rent through Venmo. Instead, your bank slapped you with a cash advance fee—the same kind you’d get withdrawing money from an ATM at a casino. That 5% fee on a $100 Venmo payment? That’s $5 you never agreed to pay, charged for a service you never requested.
Investigation #1: The Hidden Cash Advance Fee Scheme
What’s Happening
Credit card companies have quietly started classifying Venmo transfers as “cash advances” and charging fees ranging from 3% to 5% per transaction, plus higher interest rates that start accruing immediately with no grace period.
Under investigation are several major banks and credit card issuers, including:
- Chase
- Bank of America
- Wells Fargo
- Citibank
- Capital One
- U.S. Bank
- PNC Bank
- And other financial institutions
Why This Violates Consumer Protection Laws
Traditional cash advances involve withdrawing physical cash or cash equivalents. When you send money to another person via Venmo for goods, services, or splitting bills, that’s a standard transaction—not a cash advance.
The lawsuit investigation argues banks are:
- Misclassifying peer-to-peer payment transfers as cash advances
- Charging unauthorized fees consumers never agreed to
- Violating terms of their own credit card agreements
- Breaching state consumer protection laws
- Engaging in deceptive trade practices
Real User Experience
According to complaints filed with the Consumer Financial Protection Bureau, users reported discovering cash advance fees months later when reviewing statements. One consumer sent $500 to a friend via Venmo and was charged $25 in cash advance fees plus immediate interest—all without any disclosure at the time of transaction.
What You Could Recover
If a class action lawsuit is filed and successful:
- Full refund of all cash advance fees charged on Venmo/Zelle transfers
- Interest charges resulting from those cash advances
- Statutory damages under consumer protection laws
- Changes to bank policies to stop the practice
Current Status (January 2026)
Attorneys are currently gathering evidence and potential class members. No lawsuit has been filed yet, but investigations are active.
How to Help the Investigation
If you’ve been charged cash advance fees on Venmo or Zelle transfers using your credit card, you may be eligible to join the case. Save your credit card statements showing:
- Venmo transactions coded as cash advances
- Cash advance fees charged
- Higher interest rates applied immediately
- Dates and amounts of transactions
Investigation #2: Washington State Illegal Referral Text Messages
The Allegations
Venmo’s “Invite Friends” referral program allegedly violates Washington’s Commercial Electronic Mail Act (CEMA) by incentivizing existing users to send promotional text messages to friends and family without proper opt-in consent.
How the Scheme Works
When Venmo users tap the “Invite Friends” button, the app:
- Accesses their phone contacts
- Drafts pre-written promotional messages like “Tap to join Venmo: [link]”
- Sends these texts directly from the user’s phone number
- Makes it appear as though the user personally wrote the message
Recipients receive what looks like a personal text from a friend or family member, when in reality it’s a corporate marketing message sent through Venmo’s automated system.
Why This Violates Washington Law
Under CEMA, commercial electronic messages (including texts) require:
- Express permission from recipients before sending
- Clear identification as commercial messages
- Easy opt-out mechanisms
Venmo’s referral texts allegedly lack all three requirements, making them illegal under Washington State law.
Similar Settlements Show What’s at Stake
- Robinhood (February 2024): $9 million settlement for illegal refer-a-friend texts
- Block/Cash App (Mid-2025): $12.5 million settlement for similar violations
If Venmo faces similar liability, Washington residents could recover up to $500 per illegal text message received.
Who’s Eligible
Washington State residents who received referral text messages from friends or family inviting them to join or use Venmo. You must still have the text message saved.
Current Status
Attorneys are investigating and gathering evidence. No lawsuit has been filed yet, but the investigation is active as of January 2026.
The 2022 Federal Fraud Lawsuit: Still Pending
Case Background
In 2022, Mohammad Al-Ramahi filed a class action in California federal court (Case No. 5:22-cv-03632) alleging PayPal/Venmo fails to reimburse customers who are defrauded when using Venmo.
The Core Allegations
- Venmo markets itself as a “safe way to send money”
- Users who report fraud are denied reimbursement
- PayPal falsely claims federal regulations protect Venmo transactions
- In reality, Venmo has almost zero fraud protections compared to credit cards or even traditional PayPal transactions
Real Victims’ Stories
Court documents and consumer complaints describe:
- $2,000 scams with no reimbursement
- Victims told “Venmo has zero protections”
- Customer service representatives allegedly “gleeful” about lack of recourse
- Users accused of violating terms and having accounts permanently closed after reporting fraud
Why This Matters
Electronic Fund Transfer Act (EFTA) provides fraud protection for electronic payments, but Venmo has structured its service to avoid these protections by classifying transfers as person-to-person payments rather than commercial transactions.
Current Status
The lawsuit remains active in federal court. Discovery is ongoing. No settlement has been announced.
The Frozen Account Crisis: Thousands of Users Report Losses
The Widespread Problem
Since 2018, thousands of Venmo users have reported:
- Accounts frozen without notice or explanation
- Funds held for 180 days (6 months) with no access
- Customer service refusing to provide reasons for freezes
- Requirements to submit multiple forms of ID with no resolution
- Accounts permanently closed with no refund of frozen funds
One User’s Experience
A Venmo user reported having $36,000 frozen after a routine transaction. Despite providing all requested documentation and waiting the required 180 days, Venmo closed the account and refused to return the funds, claiming the account was “in a different department” with no timeline for resolution.
Another user had $50 frozen the first time they used Venmo—within 5 days of opening the account—with no explanation provided.
The FTC Already Addressed This (Sort Of)
In February 2018, the FTC settled with Venmo over deceptive practices related to frozen accounts. The settlement required PayPal to:
- Clearly disclose that funds could be frozen or removed
- Not misrepresent limitations on fund availability
- Provide clear privacy disclosures
- Undergo data security assessments for 10 years
However, user complaints about frozen accounts have continued long after the FTC settlement, suggesting the practice hasn’t stopped.
The Plaid Privacy Settlement: $58 Million (Closed)
Background
In 2021, Plaid Inc.—the financial technology company that connects bank accounts to apps like Venmo—settled a class action for $58 million after allegations it:
- Collected more financial data than necessary
- Created fake bank login screens that tricked users into giving Plaid their credentials
- Accessed transaction history, salary information, and personal data without proper consent
Venmo Users Were Eligible
Anyone who used Venmo between January 1, 2013 and November 19, 2021 was potentially part of the settlement class, since Venmo uses Plaid to connect bank accounts.
Settlement Status: CLOSED
The claim deadline passed in 2022. Payments were distributed in 2022-2023. You can no longer join this settlement.
Frequently Asked Questions
Can I still join the Plaid/Venmo privacy settlement?
No. The claim deadline passed in 2022, and payments have already been distributed. That settlement is closed.
How do I join the cash advance fees investigation?
Contact a consumer rights attorney if you’ve been charged unexpected cash advance fees on Venmo or Zelle transfers. Save all credit card statements showing these fees. Visit class action tracking websites like ClassAction.org for updates on when a lawsuit is filed.
I’m in Washington and got a Venmo referral text. What should I do?
Save the text message. Visit ClassAction.org’s Venmo investigation page to submit your information to attorneys investigating the case. Under CEMA, you could be owed $500 per illegal message.
Venmo froze my account with money in it. Can I sue?
You may have an individual claim for breach of contract or violation of the Electronic Fund Transfer Act. Consult a consumer rights attorney. Document everything: screenshots, emails, dates, amounts frozen, and any communications with Venmo.
Does Venmo have to reimburse me if I’m scammed?
That’s the question in the pending 2022 lawsuit. Venmo currently treats all transfers as person-to-person payments with minimal fraud protection. The lawsuit argues this violates federal law and Venmo’s own marketing promises.
Why are so many Venmo lawsuits filed in California?
California has strong consumer protection laws, Venmo’s parent company PayPal is headquartered in California, and federal courts in Northern California handle many technology-related class actions.
What’s the difference between the FTC settlement and the class action lawsuits?
The FTC settlement (2018) was a regulatory action that changed Venmo’s policies but didn’t provide monetary compensation to users. Class action lawsuits seek financial compensation for affected consumers.
Key Takeaways
✓ Cash advance fees investigation: Active January 2026, no lawsuit filed yet
✓ Washington referral text investigation: Active, potential $500 per illegal text
✓ PayPal fraud reimbursement lawsuit: Filed 2022, still pending in federal court
✓ Frozen account complaints: Thousands reported, FTC settled 2018 but issues persist
✓ Plaid privacy settlement: $58M paid, claims closed in 2022
✓ Multiple consumer protection violations alleged across different practices
Official Resources
- ClassAction.org Venmo Investigations: https://www.classaction.org/venmo-referral-texts-lawsuit
- FTC Venmo Settlement (2018): https://www.ftc.gov/business-guidance/blog/2018/02/venmo-settlement-addresses-availability-funds-privacy-practices-glb
- Consumer Financial Protection Bureau: https://www.consumerfinance.gov/complaint
- File FTC Complaint: https://www.ftc.gov/complaint
Disclaimer: This article provides general information about pending Venmo-related lawsuits and investigations and is not legal advice. For specific guidance about your situation, consult a qualified consumer rights attorney.
Last Updated: January 6, 2026
About the Author
Sarah Klein, JD, is a licensed attorney and legal content strategist with over 12 years of experience across civil, criminal, family, and regulatory law. At All About Lawyer, she covers a wide range of legal topics — from high-profile lawsuits and courtroom stories to state traffic laws and everyday legal questions — all with a focus on accuracy, clarity, and public understanding.
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