Judge approves settlement ordering Plaid to pay $58 million for sale of consumer data

Financial data firm Plaid is to pay $58 million and delete large amounts of consumer data as part of a class action settlement after collecting and selling user data.

OAKLAND, Calif. (CN) — A federal court judge on Wednesday approved the $58 million class-action settlement of banking app Plaid after consumers claimed the company harvested and sold their financial data without consent.

US Magistrate Judge Donna Ryu’s order found that 11 plaintiffs in five lawsuits, led by James Cottle, secured payment from all affected customers whose data was sold by tech startup Plaid using their login credentials banking. Plaid provides banking “linking” and verification services for fintech apps that consumers use to send and receive money from financial accounts such as Venmo, Coinbase, Cash App and Stripe.

Cottle’s original complaint stated that when he opened a Venmo account in 2019, he was unaware that he was sharing his banking credentials with Plaid. He said the company hid the fact that it was accessing his sensitive financial information by asking him to log into his bank to create a Venmo account.

Cottle’s case was combined with four other lawsuits filed in May, June and July 2020. Other plaintiffs said Plaid designed login screens in its interface to resemble screens used by individual financial institutions, but had not disclosed to users that they were not interfacing with their bank.

All affected customers will receive approximately $13.50 each. As part of this order, Plaid will also implement several changes to business practices, such as deleting transaction data from users who have not connected an account for transactions or those “for which Plaid is aware that it no longer has valid means that can be used to authenticate with the financial institution.

Plaid will also minimize the data it collects and stores in the future. The company must make further disclosures during each account creation process and with its privacy policy, referring to a portal where users can manage connections between apps and their financial accounts using Plaid.

The judge also ruled that the considerable cost to multiple attorneys in this lawsuit necessitated paying fees of $11 million.

In November, the Federal Court granted interim approval to the settlement. Of the roughly 98 million eligible class members, five submitted timely objections. Some demanded a more “reasonable” settlement amount paid per person, which the judge said was illegitimate since no class member incurred any disbursements due to Plaid’s practices.

Ryu’s preliminary ruling advanced allegations such as intrusion into solitary confinement, unjust enrichment and violation of California’s anti-phishing law, which prohibits misrepresenting oneself in order to induce someone. to hand over their sensitive financial information. She dismissed an allegation that Plaid violated the Stored Communications Act, which prohibits unauthorized access to electronic communications deemed to be in “electronic storage.”

Ryu dismissed without prejudice plaintiffs’ claims that they suffered damages or lost money or property as a result of Plaid’s actions, which condemned their claims of fraud under California competition law. unfair and computer fraud and abuse law.

Plaid’s press team did not immediately respond to a request for comment.

Laura Seidl of Herrera Kennedy LLP, representing the plaintiffs, said: “We are delighted to have achieved such a good result on behalf of the class, including the strong injunction that puts an end to the privacy violations that we have discovered during our investigation.

Seidl added “I think this is going to be a big deterrent to other institutions that might try to do similar things.”

The class action lawsuit struck at the same time Plaid contemplated a $3.5 billion acquisition by Visa. The Department of Justice investigated the deal in 2020 to determine whether the merger posed a threat to competition in the online debit services market. The two companies later scrapped the deal last year.

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