There are a plethora of peer-to-peer payment options on the market, think Venmo, Facebook Payments, or Square Cash. Each offer users an easy, convenient way to transfer money between people, but many have very specific intended uses; some are for paying your friends, others are for buying goods or paying for services. Some can be used for both, but may require different accounts. It’s important to know the difference, lest you become the latest victim of a scam or simply become shut out from your account. 

The specific way in which customers use a peer-to-peer service — whether to pay friend or pay for goods and services — can influence a user’s rights. For this reason, it’s imperative that you read the terms and conditions for services like Venmo or Facebook Payments to ensure you’re using the system for it was designed to do.

The Name Says It All

A peer-to-peer payment is an electronic payment between two people using a smartphone application or website.

As the name suggests, a peer-to-peer payment system is meant for just that: the transfer of money from one peer to another. It’s not referred to as a customer-to-merchant service for a reason; they aren’t intended for that use.

For instance, if you’re using an app for commercial purposes, like cutting grass, you want to make sure you’re using a system designed for businesses.

“Even if you don’t think of yourself as a business, you could be,” Christina Tetreault, our colleague and staff attorney for Consumers Union, tells Consumerist, noting that even doing something as minor as yard work or snow shoveling could constitute a business in the system’s terms.

For example, Venmo offers separate business and personal accounts for users. Personal accounts are to be used only for person-to-person transfers with friends and family, and others you may know. These accounts may not be used to receive business, commercial, or merchant transactions.

Improper Use Could Make You Vulnerable To Scams

If you’re using a personal peer-to-peer app for business purposes, you might not be covered legally if something were to happen, like a payment bounced or you become the unwitting victim of a scam.

Such was the case recently for a California man selling an expensive camera. The Verge reports that the man, who had listed his $4,300 camera for sale on Facebook’s marketplace, was contacted by a potential buyer who wished to complete the transaction through Venmo.

The man agreed, and the purchaser began sending him a series of payment all under $100. Believing the money was in his account, the man handed off the camera to its new owner. The next day, however, he found his Venmo account had been frozen and the transaction blocked.

When the man contacted Venmo, he was told that the transaction was in violation of the company’s user policy.

What’s In The Terms?

Venmo specifically notes that using a personal account for business purposes, or a business account for personal, family, or household purposes would constitute as a breach of contract, which could result in holds or transaction reversals.

“Personal accounts are for use in person-to-person transfers with friends and family, and other people whom you know,” the company’s terms state.

However, personal accounts may be used to make “Authorized Merchant Payments,” but only via certain mobile websites or applications offered by merchants that have been approved to offer Venmo as a payment option.

Still, this wouldn’t have applied to the Venmo customer, as he was the one selling a product.

According to Venmo’s terms, “personal accounts may not be used to receive business, commercial, or merchant transactions.”

While the man contends that he wasn’t a merchant, because he’s not in the camera selling business, the transaction was still classified as a merchant transaction because goods were changing hands.

What About Everyone Else?

Each P2P payment system has their own terms of service agreements that describe the ways in which the service can be used.

As for Facebook, the company notes in its payment terms that the P2P service “is not intended to be used for business, commercial, or merchant transactions and such use may be discontinued without notice by us at any time.”

Additionally, the company may place a hold on transactions or place a reserve on funds if evidence of business, commercial, or merchant use is discovered.

Further, Facebook makes it clear that the using the P2P service is done at a user’s discretion.

“P2P use is at your sole risk and we assume no responsibility for the underlying transaction of funds, or the actions or identity of any transfer recipient or sender,” the terms states.

Square Cash, on the other hand, does not prohibit the services use for commercial or business purposes, so for someone looking to make both business and private transactions, this service may be a better fit.

The service’s terms note that users agree not to send or accept payments in connection with a litany of specific businesses or business activities, including illegal activity or goods; direct marketing or subscription offers or services; infomercial sales; rebate based businesses; manual or automated cash disbursements; prepaid cards; and other products.

Still, the company says that it “may block or reverse payments” at its sole discretion, so keep in mind that using P2P services are different than simply using a bank or a credit card.

You will be dependent on the service to help when something goes wrong, and depending on their terms and conditions, the outcome may or may not be in your favor.

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