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CFPB Takes Action Against Chime Financial for Illegally Delaying Consumer Refunds
WASHINGTON DC – Today, the Consumer Financial Protection Bureau (CFPB) took action against Chime Financial for failing to refund consumers in a timely manner when their accounts were closed. Thousands of consumers waited weeks or even months for balance refunds after closing their accounts – a failure that inflicted significant financial harm on consumers who did not have access to essential funds to help make ends meet. In some cases, consumers have had to seek expensive forms of credit to cover past-due bills. The CFPB order requires Chime to provide at least $1.3 million in redress to the consumers it harmed and pay a $3.25 million fine to the CFPB Victim Relief Fund.
“Chime customers have had to wait weeks or months to access their own money and have been forced to use alternative funds to cover their essential expenses,” said CFPB Director Rohit Chopra. “Fast-growing financial companies must treat their customers fairly and understand that federal law is not a suggestion.”
Chime Financial is a non-bank company based in San Francisco. The company partners with banks to offer financial products, including checking accounts, savings accounts and credit cards. Chime has $1.5 billion in annualized revenue. Approximately seven million consumers make $8 billion in transactions using Chime cards every month. It is not publicly owned and depends, to a large extent, on investments through venture capital companies.
Chime is responsible for processing bill payments, which it does by hiring a
third-party payment processor. Chime is also responsible for nearly all account-related consumer communications and defines and enforces the policies and procedures to support them with the review and approval of the company’s partner banks.
In most cases, when consumers’ checking and savings accounts are closed, Chime automatically refunds the remaining balances by check. Until 2021, Chime’s policy, reflected in consumer account agreements, was to process and send refund checks within 14 days of account closure.
The CFPB found that Chime:
- Failure to provide consumer refunds in a timely manner: Chime did not issue refunds to consumers within the 14 days promised by its policy, including thousands of cases in which Chime did not obtain refunds to consumers within 90 days.
- Consumers deprived of the funds needed to meet their responsibilities: Chime’s slow response in returning consumer funds has prevented thousands of consumers from accessing their money – sometimes for months on end. Consumers who did not have access to their funds were often unable to pay basic living expenses and likely had to use or seek out expensive credit alternatives such as credit cards or payday loans.
Enforcement action
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices.
According to the CFPB order, Chime must:
- Pay at least $1.3 million in repairs: Chime must pay at least US$1.3 million in reparations to harmed consumers. Generally, an aggrieved consumer will receive at least $150 in redress if, after 14 days of account closure, they still have a minimum unrefunded balance of $10.
- Pay $3.25 million in fines: Chime will pay $3.25 million in fines to the CFPB’s Victim Relief Fund.
- Provide timely refunds: Chime must comply with the law, including providing refund checks for closed accounts within a reasonable period of time.
Consumers can also lodge complaints about financial products or services by visiting the CFPB website or calling (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial laws and ensures that markets for consumer financial products are fair, transparent and competitive. For more information visit www.consumerfinance.gov.