Plaid agrees to pay US users $58m after scooping up too much data

The business of handling open banking data can be a messy one, as demonstrated by Plaid in the US where it settled a class-action lawsuit in August for obtaining “more financial data than was needed”.

The issue in question was around how Plaid operated bank account login screens between 2013 and 2021—starting long before banking APIs were commonplace—that often mimicked those of a user’s own bank… while it was actually Plaid collecting the data.

As part of the settlement, Plaid admitted no wrongdoing, agreed to delete all the data that was collected and to pay valid claimants $58m.

"The claims raised in the lawsuit do not reflect our practices. We help consumers safely connect their financial accounts to the apps and services they rely on," a Plaid spokesperson said.

"As Plaid has evolved from backend infrastructure for developers to also providing front-end solutions, we have become an industry leader in consumer privacy practices. 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."

Given Plaid provides services for over 5,000 clients including Chime, SoFi,Upstart and Venmo to name a few, it’s likely that the number of valid claimants will reach into the tens of millions.

Now the open banking giant has launched a ‘Plaid Settlement’ website, calling on affected users to upload proof of their claim before the end of April.

Claimants will have already have been notified by email, and must detail the bank and app that they connected via Plaid, and the time period of that connection, which will then be checked to ensure it’s a valid claim.

Unfortunately, early calculations suggest that the individual payouts (which are also made after legal fees have been paid) will only amount to a few dollars.