WASHINGTON — Chime Financial, the fintech that saw quick growth and which was often cited by CUs as one of the growing threats to market share, failed to give consumers timely refunds when their accounts were closed, according to the CFPB.
“Thousands of consumers waited for weeks or even months for balance refunds after closing their accounts, a failure that inflicted significant financial harm on consumers who did not have access to critical funds to help make ends meet,” the CFPB said. “In some cases, consumers had to seek expensive forms of credit to cover bills that were due.”
The CFPB’s order requires Chime to provide at least $1.3 million in redress to consumers it harmed, and pay a $3.25 million penalty into the CFPB’s victims relief fund.
San Francisco-based Chime Financial partners with banks to offer financial products, including checking accounts, savings accounts, and credit cards. Chime has $1.5 billion in annualized revenue, according to the CFPB.
Seven-Million Consumers
The CFPB said approximately seven-million consumers make $8 billion in transactions using Chime cards each month. It is not publicly owned, and relies, in large part, on investments through venture capital firms, the Bureau added.
It further noted Chime is responsible for processing accounts’ payments, which it does by contracting with a third-party payment processor. “Chime is also responsible for nearly all consumer communications concerning accounts, and sets and applies the policies and procedures for servicing them with the review and approval of the company’s partner banks,” the CFPB said. “In most instances, when consumers’ checking and savings accounts are closed, Chime automatically refunds remaining balances by check. Until 2021, Chime’s policy, reflected in consumer account agreements, was to process and mail refund checks within 14 days of an account’s closure.”
The Findings
The CFPB said it found that Chime:
- Failed to timely provide consumer refunds. “Chime failed to issue consumer refunds within the 14 days promised by its policy, including thousands of instances in which Chime did not get refunds to consumers within 90 days.”
- Deprived consumers of needed funds to meet their responsibilities. “Chime’s slow response in returning consumer funds prevented thousands of consumers from accessing their money – sometimes for months on end. Consumers who did not have access to their funds were often unable to pay for basic living expenses, and likely had to use or search for expensive credit alternatives, such as credit cards or payday loans.”
Enforcement Action
Under the CFPB’s order, Chime must:
- Pay at least $1.3 million in redress. Chime must pay at least $1.3 million in redress to harmed consumers. Generally, a harmed consumer will receive at least $150 in redress if, after 14 days from account closure, they still had a minimum unrefunded balance of $10.
- Pay $3.25 million in penalties. Chime will pay $3.25 million in penalties to the CFPB’s victims relief fund.
- Provide timely refunds. Chime must come into compliance with the law, including providing refund checks on closed accounts within a reasonable period.