Financial connectivity provider Plaid has settled a $58 million class action lawsuit over claims that the fintech firm passed on personal banking data to third party firms without user consent.
The settlement encompasses five separate lawsuits combined as one. Each claims that Plaid used consumers’ banking login credentials to gather and distribute detailed financial data without prior consent.
Plaid’s technology connects users bank accounts with third-party finance apps, creditors and small business lenders. This platform, sometimes called a data transfer service, enables users to invest money, digitally pay individuals and other businesses and transfer funds straight from their bank account.
“Plaid has agreed to implement meaningful business practice changes designed to remediate alleged privacy violations, improve user control over their private login information and financial data, and safeguard their privacy going forward,” the plaintiffs’ lawyers wrote in the filing.
According to the lawsuit, filed Thursday in California federal court, the plaintiffs alleged that Plaid has “exploited its position as middleman” to obtain app users’ banking login credentials and use that information to gain access to and sell their transaction histories. Allegedly, these actions occurred without users knowing about Plaid’s role is a variance of “deceptive tactics.”