Venmo, the digital money transfer company owned by PayPal, is going after consumers who have a negative balance in their accounts.
According to a report in The Wall Street Journal, citing customer service emails reviewed by the paper, Venmo is threatening to involve debt collectors to pursue customers with negative balances. It also recently overhauled its user agreement to state that it can recover money owed from customers from their other PayPal accounts.
The move comes as the unit of PayPal continues to suffer from losses. It also underscores the challenges that banks and money transfer companies face in making payments faster and more convenient while also earning a profit.
According to the report, the majority of the $62 billion in Venmo’s payment activity is derived from money transfers, for which the company does not charge a fee. Instead, Venmo assumes the cost of processing them, which hampers its ability to earn profits.
Amid its latest actions to recover the money it is owed, Venmo is facing a backlash among customers who argue that the company is going after the wrong users. Customers owing as high as $3,000 down to as little as $7 were threatened with debt collection efforts. The paper reported that some of the customers who received threats from collectors had negative balances only because someone had taken over their account, or because they were tricked into sending a payment to a scammer.
Venmo declined to disclose how many times it has sent out collection letters, or whether it followed through on them. A spokeswoman did confirm Venmo changed its user agreement in order to access other PayPal accounts. “These changes, which have been a PayPal policy for a while, are a result of our efforts to drive policy consistency across platforms,” the spokeswoman told the news wire in an email.