Recover frozen funds from Square (Block, Inc.) account deactivations and holds. California law provides protections for merchants and sellers against unjustified fund freezes under the Money Transmission Act and UCL.
180 Days
Maximum Reserve Hold Period
$10K
CA Small Claims Limit
4 Years
UCL Statute of Limitations
Square Account Freezes in California
Square (now Block, Inc.) provides payment processing to millions of California small businesses and sellers. When Square freezes or deactivates your account, it can devastate your business operations and cash flow. Understanding your rights under California law is essential to recovering your funds.
Critical: Square can hold your funds for up to 180 days under their standard reserve policy, but extended or indefinite holds without proper justification may violate California's Money Transmission Act and Unfair Competition Law. Act quickly to document everything and assert your rights.
Common Square Account Freeze Scenarios
Freeze Type
Typical Cause
Recovery Strategy
Risk Reserve Hold
High transaction volume, new account, industry type (high-risk merchant category)
Negotiate - Document business legitimacy, provide transaction evidence
Chargeback Reserve
High chargeback ratio, disputed transactions, fraud alerts
Industry restrictions: Prohibited or high-risk business categories
Your Immediate Action Steps
Document the freeze - Screenshot account status, balance, and any notifications
Request written explanation - Demand specific reasons for the hold
Gather transaction records - Export all sales data and customer information
File DFPI complaint - California regulator has authority over Square
Preserve communications - Save all emails and chat transcripts with Square
California Advantage: Square is licensed as a money transmitter in California (License #2776283) and is regulated by the Department of Financial Protection and Innovation (DFPI). California's strong consumer protection laws, including the UCL and Money Transmission Act, provide remedies that may not be available in other states.
California Legal Framework for Square Disputes
California provides robust protections for merchants and consumers dealing with payment processors like Square. Multiple statutes and regulatory frameworks apply to fund freezes and account deactivations.
Square operates as a licensed money transmitter in California. The Money Transmission Act requires licensees to maintain adequate security for customer funds, provide clear disclosure of terms, and comply with DFPI regulations. Violations can result in license revocation and civil penalties.
Unfair Competition Law (UCL)
Business & Professions Code Section 17200
California's broad consumer protection statute prohibits any "unlawful, unfair, or fraudulent business act or practice." Square's arbitrary or unjustified fund freezes may constitute unfair business practices. Provides for restitution, injunctive relief, and civil penalties up to $2,500 per violation.
California Consumer Legal Remedies Act (CLRA)
Civil Code Sections 1750-1784
Prohibits unfair and deceptive practices in consumer transactions. While primarily consumer-focused, small business owners may have CLRA claims if Square's representations about its services were misleading. Provides actual damages, punitive damages, and attorney fees.
DFPI Regulatory Authority
Financial Code Section 90000 et seq.
The California Department of Financial Protection and Innovation (DFPI) has broad authority to investigate complaints against licensed money transmitters, conduct examinations, and take enforcement action. Filing a DFPI complaint creates an official record and may prompt Square to resolve disputes.
California Statutes of Limitations
Claim Type
Deadline
Code Section
UCL Claim
4 years
B&P Code Section 17208
CLRA Claim
3 years
Civil Code Section 1783
Written Contract (Terms of Service)
4 years
CCP Section 337
Conversion (Wrongful Taking)
3 years
CCP Section 338(c)
Fraud
3 years from discovery
CCP Section 338(d)
Arbitration Clause: Square's Terms of Service contain a mandatory arbitration clause. Most disputes must go through arbitration rather than court litigation. However, California small claims court (up to $10,000) may be available as arbitration clauses are generally unenforceable there under California law.
DFPI Complaint Process
The California Department of Financial Protection and Innovation (DFPI) is the primary regulator for money transmitters like Square:
File online: Visit dfpi.ca.gov/file-a-complaint
Select company type: Choose "Money Transmitter"
Provide details: Account information, transaction history, freeze dates
Request action: Fund release, account reinstatement, investigation
California Private Attorney General: California law allows private citizens to enforce consumer protection statutes. Attorney fees are recoverable under CLRA and certain UCL claims, making it economically viable for attorneys to take smaller cases on contingency.
Square's Payment Terms and Policies
Understanding Square's contractual terms is essential to challenging account freezes. Square operates under several interconnected agreements that govern your rights and obligations.
Key Square Agreements
Payment Terms (Seller Agreement)
Reserve Rights: Square can hold a "Reserve" for anticipated chargebacks or refunds
Deactivation: Square may suspend or terminate at any time for Terms violations
Fund Holds: Can hold funds up to 180 days after account closure
Offset Rights: Can deduct amounts owed from your balance
Prohibited Activities: List of restricted business types and activities
General Terms of Service
Arbitration Clause: Mandatory binding arbitration for most disputes
Class Action Waiver: Waiver of class action rights
Choice of Law: California law applies
Modification Rights: Square can change terms with notice
Limitation of Liability: Caps on Square's liability for damages
If you have a Square Capital loan, additional considerations apply:
Automatic Repayment: Square deducts loan payments from your sales
Acceleration: Account closure may trigger full loan acceleration
Cross-Default: Terms violation in one agreement may default others
Collection Rights: Square can pursue collection through various means
Hardware Liens: If you financed Square hardware (terminals, registers), Square retains a security interest. Account closure doesn't eliminate this debt, and Square may report to credit bureaus or pursue collection for outstanding balances.
Key Contractual Arguments: Even though Square's terms are broad, California law requires that contract terms be enforced in good faith. Arbitrary enforcement, selective application, or failure to provide required notices may constitute breach of the implied covenant of good faith and fair dealing under California law.
Evidence and Documentation Checklist
Strong documentation is critical for recovering frozen Square funds. Gather evidence immediately upon learning of the freeze - don't wait for Square's final decision.
Export Data Immediately: Square may limit your access to transaction data after account deactivation. Export all available data from your dashboard immediately, including transaction reports, customer information, and payout history.
Preservation Demand: Send Square a written demand to preserve all records related to your account, the freeze decision, and any internal review. Under California law, destruction of relevant evidence after a preservation demand can result in adverse inference and sanctions.
Sample California Square Account Freeze Demand Letter
Customize this template for your specific situation. Include all relevant facts, documentation, and California-specific legal claims.
[Your Name / Business Name]
[Your Address]
[City, CA ZIP]
[Your Email]
[Date]
Block, Inc. (dba Square)
Attn: Legal Department
1955 Broadway, Suite 600
Oakland, CA 94612
Via Email: legal@squareup.com
Via Certified Mail, Return Receipt Requested
Re: Demand for Release of Funds - Account Freeze
Square Account ID: [Your Account ID]
Business Name: [Your Business Name]
Account Freeze Date: [Date]
Frozen Amount: $[Amount]
Dear Legal Department:
I am a California merchant whose Square account was frozen/deactivated on [Date], resulting in $[Amount] being withheld from my business. I demand the immediate release of these funds and formal explanation of the basis for this action.
ACCOUNT HISTORY
I have operated a Square merchant account since [Date], processing approximately $[Amount] in monthly transactions for my [describe business type] business located in [City], California. My account has maintained [describe performance: low chargeback rate, consistent sales, etc.]. I received no prior warnings or notices before the freeze.
FREEZE CIRCUMSTANCES
On [Date], I discovered that my Square account had been [frozen/deactivated/limited]. The notification stated [quote any reason given, or "no specific reason was provided"]. My attempts to contact Square support on [dates] resulted in [describe responses: no response, generic response, etc.].
My account currently shows a balance of $[Amount] that I am unable to access. This includes:
- Pending deposits: $[Amount]
- Reserve balance: $[Amount]
- Other held funds: $[Amount]
LEGAL ANALYSIS
Square's freeze of my funds without adequate justification violates California law:
1. California Money Transmission Act (Financial Code Division 1.2)
Square operates as a licensed money transmitter in California (License #2776283). The Money Transmission Act requires licensees to maintain adequate safeguards for customer funds and provide clear disclosure of terms. Holding my funds indefinitely without specific justification exceeds Square's authority under its license and violates its obligations to the California DFPI.
2. California Unfair Competition Law (B&P Code Section 17200)
Square's arbitrary account freeze constitutes an unfair business practice. The freeze causes substantial injury to my business, is not outweighed by countervailing benefits, and could not reasonably have been avoided by me. Under the UCL, I am entitled to restitution of all funds held, plus civil penalties of up to $2,500 per violation.
3. Breach of Contract and Implied Covenant of Good Faith
Square's Payment Terms, while broad, must be exercised in good faith under California law. The arbitrary freeze without specific violation, adequate notice, or meaningful appeal process breaches the implied covenant of good faith and fair dealing. See Carma Developers v. Marathon Development, 2 Cal.4th 342 (1992).
4. Conversion
By refusing to release my funds without lawful justification, Square has exercised dominion over my property in a manner inconsistent with my ownership rights, constituting conversion under California law.
DEMAND
I demand that Block, Inc. (Square):
1. Immediately release all funds currently held in my account totaling $[Amount];
2. Provide a specific, written explanation of the alleged violation or risk that justified the freeze;
3. If any legitimate dispute exists, provide a meaningful opportunity to respond and cure;
4. Reinstate my account in good standing, or provide specific grounds for permanent termination;
5. Compensate my business for damages caused by the freeze, including [lost sales, bank fees, etc.] totaling approximately $[Amount].
DEADLINE AND CONSEQUENCES
If I do not receive full release of my funds within fourteen (14) calendar days of this letter, I will:
- File a formal complaint with the California Department of Financial Protection and Innovation (DFPI) regarding Square's money transmitter license;
- File a complaint with the Consumer Financial Protection Bureau (CFPB);
- Pursue arbitration under the Square Terms of Service for breach of contract, conversion, and violation of California law;
- Alternatively, file suit in California Small Claims Court for amounts within jurisdictional limits;
- Seek all available remedies including actual damages, restitution under UCL, and attorney fees.
DOCUMENT PRESERVATION
This letter serves as formal notice to preserve all documents, data, and communications related to my account, the freeze decision, any internal review or risk assessment, and communications with any third parties regarding my account. Destruction or alteration of relevant evidence after this notice may result in adverse inference and sanctions under California law.
Please direct all correspondence to [Your Email] and the address above. I expect a substantive response within fourteen (14) days.
Sincerely,
[Your Signature]
[Your Printed Name]
[Your Business Name]
Enclosures:
- Square account dashboard screenshot showing frozen status and balance
- Transaction history summary
- Communications with Square support
- Business documentation (license, tax registration)
- Evidence of business legitimacy and low-risk operations
Important: Send your demand via certified mail, return receipt requested, AND email to legal@squareup.com. Keep copies of everything. Customize the letter with your specific facts and remove any sections that don't apply to your situation.
Alternative: Small Claims Court in California
For amounts up to $10,000, California small claims court may be a faster alternative to arbitration:
Arbitration clauses are generally unenforceable in California small claims court
File in the county where you do business or where Square has an office (Alameda County)
Filing fee is typically $75-$100
Hearing usually scheduled within 30-70 days
No attorneys allowed (you represent yourself)
How I Handle California Square Account Freeze Cases
I personally draft and negotiate Square account freeze demand letters for California merchants. These cases require understanding both California financial regulation and Square's specific policies and procedures.
Case Evaluation
Review your Square account history and freeze circumstances
Analyze Square's stated reasons (if any) for the freeze
Identify California law violations and contractual breaches
Assess strength of claims and likely recovery
Demand Letter Drafting
Comprehensive demand citing California Money Transmission Act, UCL, and contract law
Document preservation demands
DFPI complaint preparation
Strategic deadline and consequence framework
Escalation Support
California DFPI complaint drafting and submission
CFPB complaint preparation
Arbitration demand under Square's terms
Small claims court guidance (within jurisdictional limits)
Typical Outcomes
Full or partial fund release within 30-60 days
Account reinstatement in appropriate cases
Negotiated settlements for disputed amounts
DFPI intervention for pattern violations
Square Froze Your California Business Account?
I handle California Square account freeze demand letters and fund recovery personally. Contact me for a case evaluation.
Square account freeze cases are typically handled on:
Flat fee: $450 for demand letter preparation and initial Square response negotiation
Hourly: $240/hour for complex cases, arbitration preparation, or regulatory complaint support
Contingency: 33% of recovery for cases requiring escalation, arbitration, or litigation
Free Initial Review: I review Square account freeze cases at no charge to assess whether a demand letter is likely to succeed. Send your account documentation to owner@terms.law with "Square Freeze" in the subject line.
What Makes a Strong Case
Clear account history with no prior warnings or violations
Low chargeback rate and legitimate business operations
Vague or absent explanation from Square for the freeze
Significant frozen balance causing business harm
Good documentation of transactions and customer relationships
Willingness to pursue escalation if demand is rejected
Honest Assessment: Not every Square freeze is wrongful. If your account has high chargebacks, operates in a prohibited category, or has legitimate Terms violations, I will tell you directly and discuss realistic options rather than promising unlikely outcomes.