Chime Financial must pay $4.55 million for its alleged failure to refund in a timely fashion customers who have closed their accounts.
The Consumer Financial Protection Bureau said thousands of Chime customers waited for weeks — sometimes months — to recoup funds, which inflicted financial harm because those customers lacked access to necessary funds, the bureau said in a Tuesday release regarding the enforcement action.
In some cases, customers have been forced to seek out “expensive forms of credit to cover bills that were due,” the consumer watchdog said.
Chime, which was found in violation of the Consumer Protection Act of 2010, must pay at least $1.3 million in redress to harmed customers on top of a $3.25 million penalty to the CFPB’s victims relief fund.
“Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion,” CFPB Director Rohit Chopra said in a prepared statement.
Chime is not a bank but a fintech with two Federal Deposit Insurance Corp.-insured partner banks. It is, however, responsible for processing account payments, which it does through a third-party payment processor, and for most consumer communications concerning accounts.
Company policy dictates that Chime refund balances within 14 days of an account’s closure. But the CFPB said it found thousands of instances in which refunds weren’t issued within 90 days.
Affected customers will receive at least $150 in redress if, after 14 days from account closure, they had an unrefunded balance of $10 or more.
Chime agreed to the consent order without admitting or denying legal violations.
“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,” a Chime spokesperson said. “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,” the spokesperson said. “We look forward to continuing in this mission and are pleased to have resolved this matter.”
The CFPB order wouldn’t be Chime’s first settlement of the year. The fintech agreed to pay $2.5 million in February to resolve an investigation by California’s Department of Financial Protection and Innovation into the accuracy and responsiveness of Chime’s customer service transactions.
That order also pertains to the early part of this decade. The DFPI said Chime made “occasional mistakes” in its handling or evaluation of some customer complaints between January and March of 2021.
The agency did not detail the errors, but the time period aligns with an article by ProPublica that focuses on instances in which Chime allegedly closed some customers’ accounts against their will.
Last week, Forbes reported that the fintech has seven million active users who transact $8 billion monthly through Chime cards.
