The bell chimes for thee, Chime.
The Consumer Financial Protection Bureau (CFPB) has taken enforcement action against consumer fintech company Chime Financial for “failing to give consumers timely refunds when their accounts were closed.”
In a news release on Tuesday, the watchdog agency said that “thousands of consumers [waited] weeks or even months” to get their remaining balances back from Chime after closing their accounts. As a result, the CFPB is levying a $3.25 million penalty against the company, and ordering it to repay at least $1.3 million to customers.
All told, “harmed consumers” will receive at least $150 in redress, the CFPB says, if they didn’t get their balance refunds within 14 days of closing their accounts, and their balances were at least $10.
The CFPB does note in its release that “Chime is responsible for processing accounts’ payments, which it does by contracting with a third-party payment processor.” In a statement provided to Fast Company, Chime says that a third-party processor was the crux of the issue.
“In this case, the majority of the delayed refunds were caused by a configuration error with a third-party vendor during 2020 and 2021,” the company says. “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.”
A busy week for CFPB enforcement
Chime isn’t alone in drawing recent fire from the CFPB. On Monday, the CFPB fined the National Collegiate Student Loan Trusts and Pennsylvania Higher Education Assistance Agency (PHEAA) $2.15 million for “multiyear servicing failures,” and ordered the organization to pay nearly $3 million in redress to borrowers who were ignored in recent years when requesting pandemic-related forbearance.
The CFPB’s actions concerning Chime may serve as a warning shot to other fintech companies that may be dragging their feet in responding to customers in a timely manner.
“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, in the CFPB’s release. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”
What happens next with the Chime Financial refunds?
The CFPB says Chime must provide the refund checks within a “reasonable period.” According to the consent order, Chime must create a redress plan outlining how it will determine which consumers are eligible for refunds. Once that plan is approved, it has 60 days to notify impacted consumers and distribute the payments.