Plaid to pay $58M to some fintech app users to settle lawsuit (updated)
marchmeena29/iStock via Getty Images


Plaid, the fintech platform that underlies digital payments services for thousands of financial institutions, agrees to pay $58M to consumers who have linked a bank account to any of the company's 5,500+ client apps, to settle a proposed class action lawsuit, Fast Company reports.

Such client apps include services by American Express (AXP
-2.4%), PayPal's (PYPL
-5.5%) Venmo, Robinhood (HOOD
-9.7%), and Coinbase (COIN
-12.4%).
The lawsuit alleges that Plaid collected more data than it needed for a user's app and obtained usernames and passwords through its user interface, which had the "look and feel of the user's own bank account login screen," according to the settlement website. Thus, users were providing their login credentials directly to Plaid, the suit alleges.
In response, Plaid denies the allegations and any wrongdoing and said it adequately disclosed and maintained its transparency about its practices to consumers.
As part of the settlement, Plaid agreed to minimize the data it stores going forward, to delete certain previously retrieved data, and to improve and maintain some already-implemented enhancements to Plaid Link. The members of the class action lawsuit are able to view and manage the connections they've made between their financial accounts and chosen apps using Plaid, and delete data stored in Plaid's systems by creating a Plaid Portal account at my.plaid.com.
The settlement is subject to court approval, a process that may take several months or more if appealed.
"The claims raised in the lawsuit do not reflect our practices," a Plaid spokesperson said in an emailed statement to Seeking Alpha. "We do not, nor have we ever, sold data. We make our role and practices clear, and provide services that give consumers control over how and where they share their data." (Added at 11:45 AM ET).
The company agreed to settle in light of the cost and burden associated with protracted litigation, the spokesperson added. Plaid discussed the proposed settlement in an August blog post.

Recall that over a year ago, Visa (NYSE:V) and Plaid scrapped their merger agreement after the U.S. Justice Department sued to block the $5.3B deal on antitrust grounds.