WASHINGTON— The Consumer Financial Protection Bureau (CFPB) has taken action against one of the best-known fintechs, Chime, for deceiving consumers about the speed and cost of remittance transfers through its mobile app, Sendwave.
According to the CFPB, Chime also illegally forced consumers to waive their legal rights, failed to provide consumers with legally required disclosures and receipts, and failed to properly investigate consumer disputes and errors.
The CFPB is ordering Chime to refund affected consumers nearly $1.5 million in fees and pay a $1.5 million penalty into the CFPB’s victims relief fund.
The Bureau said Chime (doing business as Sendwave) is a nonbank fintech company incorporated in Delaware with its principal place of business in Boston. It is a wholly owned subsidiary of WorldRemit, which had total revenues of nearly $400 million in 2021.
The Findings
The CFPB said it found that Chime violated the Electronic Fund Transfer Act and the CFPB’s Remittance Transfer Rule. Specifically, the CFPB said Chime:
- Forced consumers to waive their legal protections. Sendwave users were required to sign a “remittance services agreement,” which protected Chime from being responsible for losses the consumer incurred through use of the Sendwave app. As part of that remittance services agreement, Chime also limited its liability for damages to $1,000. Both of these provisions illegally restricted consumer rights afforded under the Electronic Fund Transfer Act
- Made false promises about the speed and cost of remittance transfers. “Chime’s marketing on social media platforms deceptively told consumers that Sendwave remittance transfers would be delivered ‘instantly,’ in ‘30 seconds,’ or ‘within seconds.’ In many cases, these transfers took much longer. Chime also misrepresented to consumers how much it would cost to send money from the United States to Nigeria, telling consumers those transfers would incur ‘no fees’ when in fact consumers were charged fees.”
- Failed to provide required disclosures. Chime did not accurately disclose the date by which funds would become available to certain recipients, and also failed to accurately represent the exchange rates to the correct decimal as required by law.
- Failed to track, investigate, and resolve errors. The CFPB said Chime did not have proper policies and procedures in place to find and track remittance transfer errors, nor did the company conduct proper investigations upon notification of errors
- Failed to provide receipts in a timely manner. The Remittance Transfer Rule requires a provider offering remittance transfers solely through a mobile app to provide the consumer with a receipt within one business day of payment. The company would instead wait until funds were electronically delivered to the recipient before providing a receipt, which sometimes took more than a business day.
Enforcement Action
The CFPB’s order requires Chime to:
- Refund fees to affected consumers. Chime must refund certain charges to consumers who sent remittance transfers from the United States to Nigeria during the time Chime was deceptively marketing its transfers as fee-free. Chime must also refund any fees consumers paid when the Sendwave app promised delivery by a certain date and then failed to deliver the funds to the designated recipient by that date
- Pay $1.5 million into the CFPB victims relief fund. Chime is required to pay a $1.5 million penalty, which will be deposited into the CFPB victims relief fund.
Are You Being Gouged for Bank-Like Subscription Fees for Old News? Here’s a CU-Like Way to Fix That
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So, stop paying those bank-fee-like subscription prices from other so-called “news”” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?