Chime, the largest digital bank in America, has been fined $3.25 million by the Consumer Financial Protection Bureau (CFPB) for delays in issuing refunds to customers after their accounts were closed. Chime partners with Bancorp Bank and Stride Bank to offer banking products like checking accounts, savings accounts, a secured credit card, and personal loans. The CFPB has fined multiple fintech companies over the years for violations of consumer protection laws.
The San Francisco-based Chime will need to pay at least $1.3 million to compensate affected customers and a fine of $3.25 million to the CFPB’s victims relief fund. Chime took longer than 90 days to issue refund checks in thousands of instances, according to the consent order it has entered into with the CFPB. The delays in refunds left customers struggling to cover day-to-day necessities such as groceries, gas, and housing, leading them to resort to expensive sources of credit.
Chime attributed the majority of the delays to a configuration error with a third-party vendor during 2020 and 2021, stating that the settlement agreement reflects their belief in the timely handling of customer matters, especially during the pandemic. The surge in new customers during the pandemic also led to an increase in fraud, prompting Chime to close many accounts to combat fraudulent activities. Some of the fraud was committed by regular customers experiencing financial difficulties, leading to legitimate accounts being closed by mistake.
As part of the settlement agreement with the CFPB, Chime agreed to make payments to customers if it took more than 14 days to process a refund check after their accounts were closed. Customers with $10 or less in their accounts will receive $25, while those with more than $10 will get at least $150. Chime will be under the consent order for five years and will need to develop a comprehensive compliance plan to ensure their post-closure account-refund practices comply with applicable laws.
In addition to the CFPB fine, Chime also reached a $2.5 million settlement with the California Department of Financial Protection and Innovation regarding its responsiveness to customer complaints between January 2021 and March 2021. Chime stated that they had already implemented the reforms identified by the DFPI and were pleased to resolve the matter. The company has faced challenges in handling customer complaints and ensuring timely refunds, leading to regulatory actions and settlements to address these issues.
