‘Federal law is not a suggestion’ CFPB warns as fintech to pay $4.55M
The agency has issued a stark warning to financial firms.
The Consumer Financial Protection Bureau has warned challenger financial firms that they cannot avoid the rules requiring the fair treatment of customers.
The agency made the statement following its decision to impose financial penalties on San Francisco headquartered fintech Chime Financial for failing to give consumers refunds within the required 14 days on the closure of their accounts.
“Chime’s customers had to wait weeks or months for access to their own money and were forced to use alternative funds to cover their essential expenses,” said CFPB Director Rohit Chopra. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”
The matter affected thousands of the nonbank’s customers with some left without the funds they needed to basic living expenses, and some forced to borrow from other sources – including payday loans and credit cards – to pay bills.
The payments include at least $1.3 million in redress to harmed customers. Generally, they will receive at least $150 in redress if, after 14 days from account closure, they still had a minimum unrefunded balance of $10.
Chime must also pay $3.25 million to the CFPB’s victim relief fund, the Civil Penalty Fund, established by Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and must come into compliance with the law, including providing refund checks on closed accounts within a reasonable period.
Chime Financial has annualized revenues of more than $1.5 billion and its cards are used by around seven million customers in $8 million worth of transactions each month. It is privately owned with investment from venture capital firms and was founded by Chris Britt and Ryan King in 2012.
UPDATED: Chime has clarified the payments due and also told InvestmentNews:
“Our settlement agreement with the CFPB reflects our belief that the timely handling of customer matters is critical, even amid the pandemic’s unique challenges. In this case, the majority of the delayed refunds were caused by a configuration error with a third-party vendor during 2020 and 2021. When Chime discovered the issue, we worked with our vendor to resolve the error and issued refunds to impacted consumers. We share the Bureau’s goal to create a more competitive and accessible financial landscape that is good for everyday consumers. We look forward to continuing in this mission and are pleased to have resolved this matter.”
Learn more about reprints and licensing for this article.
