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Plaid agreed to pay $58 million to settle a class-action lawsuit alleging that it violated users' privacy by collecting information from their financial accounts without their permission.

The proposed settlement agreement comes after a year of hard-fought litigation and five months of contentious settlement negotiations and mediations between the legal counsels of the Class Members and the financial technology company. Retired Judge Jay Gandhi served as mediator between the parties.

Plaid connects over 11,000 financial institutions worldwide. Money transfer service providers such as Chime, Venmo, Zelle, and other financial services providers including online brokerages firms like Robinhood require users to link their app account to a bank account. The fintech company provides the digital bridge between financial services providers and banks.

On July 29, 2020, the U.S. District Court for the Northern District of California consolidated five related consumers' lawsuits against Plaid. On August 5, 2020, the plaintiffs filed a class-action lawsuit against the fintech company. The Class Members alleged that the fintech company misled them, invaded their privacy, and sold their data to other parties. The fintech company strongly denied the allegations and vowed to defend itself in court.

Details of the proposed settlement between the Class Members and Plaid

On August 5, 2021, the parties submitted their proposed nationwide class action settlement agreement to the court.

Under the proposed settlement Plaid will provide substantial relief to Class Members. It includes a $58 million non-reversionary cash fund, an injunctive relief that resolves the fintech company's alleged misconduct.

The injunctive relief includes a requirement for the fintech company to implement "certain changes to the design of its standard interface," to be more transparent to consumers by providing "fulsome disclosures," and "delete transactional banking data for
consumers whose apps did not request that data."

"This proposed nationwide class action settlement resolves claims against Plaid for
invasion of privacy/intrusion into private affairs, unjust enrichment, deceit, and violations of California Constitution (Article I, Section I) and California’s Anti-Phishing Act of 2005
(“CAPA”), Cal. Bus. & Prof. Code § 22948 et seq...," according to the parties.

In a blog post, Plaid reiterated its commitment to consumers' privacy. The fintech company once again denied the allegations against it.

Plaid wrote that it "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."

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