San Francisco-based fintech firm Plaid has reached a $58m settlement to resolve allegations that it used consumers’ financial data without permission.
The settlement, which covers five class-action lawsuits, addresses charges that the firm “exploited its position as middleman”.
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As per allegations, the firm used consumers’ banking login credentials to access and distribute their financial information without their consent.
This settlement impacts around 98 million users and also includes an injunctive relief.
Plaid has now agreed to delete certain financial account activity data from its systems, including data from closed accounts as well as minimise the data it stores.
It also agreed to implement clear disclosures about its role when users connect their accounts to a fintech app, and improve privacy policy disclosures.
In a statement, the fintech said: “Plaid does not, and never has, sold data; we make our role and data practices clear to consumers, and the claims in the lawsuit don’t reflect how Plaid does business.
“While we disagree with the claims, we believe the settlement that the parties were able to achieve is the best path forward and is aligned with Plaid’s principles around consumer control and transparency, as well as avoids the burdens associated with protracted litigation.”
Set up in 2013, Plaid connects customers’ bank accounts to fintech apps. The firm empowers over 4,000 financial apps and services.
This April, Plaid raised $425m in a Series D financing round to scale its platform.
Notably, earlier this year, Visa and Plaid have called off their $5.3bn merger agreement following a lawsuit filed by the US Department of Justice (DOJ) to scrap the deal.
The DOJ believed that the deal would eliminate the significant competition from Plaid, which is building a payments platform that would challenge Visa’s monopoly in the online debit market.
