The Consumer Financial Protection Bureau (CFPB) yesterday announced an enforcement action against Chime Financial, a San Francisco-based fintech company, for not providing timely refunds to customers after closing their accounts. This delay affected thousands of consumers, compelling many to turn to costly credit solutions to meet essential expenses. The company will have to pay nearly $5 million in penalties and refunds to consumers.
Chime, which collaborates with banks to offer financial products like checking and savings accounts, found itself in hot water when the CFPB discovered the company had routinely failed to issue refunds within the promised 14-day period following account closure. In many instances, consumers waited more than 90 days to receive their money. This failure breached the Consumer Financial Protection Act of 2010, prompting the CFPB to investigate and take this action.
The penalties include a direct financial impact on Chime with at least $1.3 million required to be paid as redress to affected consumers. Each eligible consumer will receive a minimum of $150. Additionally, Chime is mandated to pay a $3.25 million fine into the CFPB’s victims relief fund.
Chime’s customers, who used their accounts for daily necessities, experienced substantial difficulties due to the company’s failure to provide timely refunds. The delays left many without access to their own funds, leading to accrued debts and financial strain as customers sought alternative funding sources, including high-interest credit cards and payday loans. The 14-day period was to allow pending transaction to clear, but that usually happened in a few days, the CFPB noted. The enforcement action did not say why it took so long for consumers to receive their funds.
Moving forward, Chime must adhere strictly to compliance measures set by the CFPB. The order stipulates that Chime must improve its refund processes to ensure timely delivery of services, which will be under close monitoring by the Bureau.
