Fintech firm Plaid agrees to $58 mln deal to end privacy case

  • Summary
  • Companies
  • Law firms
  • Proposed settlement includes injunctive relief
  • Cooley represents Plaid in the litigation

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(Reuters) – Plaid Inc has agreed to pay $58 million to resolve consumers’ claims that the financial technology company obtained and used bank account credentials and financial information without consent.

San Francisco-based Plaid also agreed in the nationwide settlement to change certain business practices, according to filings Thursday in California federal court made by lawyers for consumers.

“Plaintiffs look forward to presenting the settlement—and its benefits for consumers—to the court,” Rachel Geman of Lieff Cabraser Heimann & Bernstein, Christopher Cormier of Burns Charest and Shawn Kennedy of Herrera Kennedy, lawyers for the plaintiffs, said in a statement.

Michael Rhodes of Cooley, lead counsel for Plaid, said in a statement the settlement “resolves claims that go back to the earliest days of the company – as such, the underlying claims and challenged conduct do not reflect today’s Plaid.”

“The settlement’s core provisions align with the workflows that were already underway – data minimization, enhanced user control, simplified UI’s and dashboards for privacy; as such, we readily agreed to monument these provisions in this agreement,” Rhodes said.

The injunctive relief that Rhodes referenced is detailed in the memo in support of the preliminary approval motion filed with the court Thursday. “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.

The consolidated litigation includes five proposed class actions filed last year against Plaid, which has a platform for users to connect their bank accounts to payment apps like Venmo and Square’s Cash App. The plaintiffs alleged in their lawsuit 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, without users knowing about Plaid’s role due to alleged deceptive tactics.

A California federal magistrate judge in May dismissed some of the claims in the case while letting others proceed. The proposed settlement would resolve claims for invasion of privacy, unjust enrichment and violation of California’s anti-phishing law, among others.

Lawyers for the plaintiffs plan to request attorneys’ fees up to 25% of the settlement fund.

The case is In Re Plaid Inc Privacy Litigation, U.S. District Court for the Northern District of California, No. 4:20-cv-03056.

For the plaintiffs: Christopher Cormier of Burns Charest; Rachel Geman of Lieff Cabraser Heimann & Bernstein; Shawn Kennedy of Herrera Kennedy

For Plaid: Michael Rhodes of Cooley

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Judge narrows privacy case against fintech firm Plaid

Sara Merken

Sara Merken reports on privacy and data security, as well as the business of law, including legal innovation and key players in the legal services industry. Reach her at sara.merken@thomsonreuters.com

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Sara Merken