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Settlement in Plaid Fintech Data Case

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Plaid banking integration - Settlement in Plaid Fintech Data CaseOn August 5, 2021, a proposed class action settlement was reached in the closely-watched privacy action against fintech services company Plaid Inc. (“Plaid”).  The settlement features a $58 million settlement fund and certain injunctive relief that would make changes to Plaid’s methods of notice and consumer data collection, including provisions requiring the deletion of certain banking transaction data. (In re Plaid Inc. Privacy Litig., No. 20-3056 (N.D. Cal. Memorandum of Points for Proposed Settlement Aug. 5, 2021)). The settlement is still subject to court approval.

Plaid is a fintech services company that offers applications that provide account linking and verification services for various fintech apps that consumers use to send and receive money from their bank accounts.  The consolidated actions involve claims surrounding Plaid’s alleged collection and use of consumers’ banking login credentials and later processing and selling of such financial transaction data to third parties without adequate notice or consent.  Plaintiffs’ complaint also contended that at no time were users ever given conspicuous notice or meaningfully prompted to read through Plaid’s privacy policy indicating that Plaid receives and retains access to their financial institution account login credentials or uses their credentials to collect and sell their banking information.  

See:  Biden Administration Issues Executive Order “Promoting Competition” Including Consumer Data Ownership and Banking.

Here is a quick rundown of the material terms of the proposed settlement:

  • Monetary relief: $58 million fund to the defined settlement class of consumers who, among other things, held a financial account that Plaid accessed using the user’s login credentials and connected to a mobile or web-based fintech application.
  • Deletion of Data: Plaid will delete data that was retrieved as part of Plaid’s “Transactions” product—which can include information about financial account activity, such as the amount, time, and place of deposits, withdrawals, transfers, or purchases—for users that Plaid can reasonably determine did not connect an account to an application that requested Transactions data. Thus, if a consumer exclusively connected an application (or applications) that did not ask Plaid to collect Transactions data, but Plaid retrieved that data anyway, then Plaid will delete that data from its systems.
  • Injunctive relief: Plaid agreed to change a number of its privacy and data collection practices (for at least three years within the U.S.), including promises to: (1) inform class members on how to use the Plaid Portal and manage the connections made between their financial accounts and chosen fintech apps applications using Plaid and delete data stored by Plaid; (2) employ clear disclosures about Plaid’s role when consumers link financial accounts to a fintech app, avoid using the particular bank’s own color scheme in the credential pane, and require users to affirmatively agree to Plaid’s privacy policy; (3) minimize the data Plaid stores (subject to certain limitations), such that Plaid will only store the categories of data for the Plaid product that the user’s app specifically requests from Plaid or that are necessary for Plaid to offer its services, unless the user has expressly consented to additional data collection; (4) enhance privacy policy disclosures; and (5) continue to host a dedicated webpage about Plaid’s security practices.

This is a major settlement in the fintech privacy area, as the collection and use of consumer data has become more scrutinized in the past few years, especially amidst the wave of fintech and money transfer apps that have become popular with consumers.

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NCFA Jan 2018 resize - Settlement in Plaid Fintech Data Case The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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