Fintech
CFPB takes action against fintech company for allegedly withholding consumer refunds | Hudson Cook, LLP
HIGHLIGHTS:
- The Consumer Financial Protection Bureau (“CFPB”) has issued a Consent Order against a San Francisco-based fintech company (“Company”) that provides checking and savings accounts to consumers for allegedly withholding refunds beyond the 14-day window for the closed accounts established in the Company’s agreements with account holders.
- The CFPB ordered the Company to pay $1.3 million in consumer restitution and a $3.25 million penalty into the Victim Relief Fund.
- The Company must also cease certain disputed practices and improve post-closing reimbursement procedures.
CASE SUMMARY:
On May 7, 2024, the CFPB imposed a total of $4.6 million in damages and fines on the Company for allegedly withholding account closure refunds from its consumers for an unreasonable period of time. The Company offers checking and savings accounts primarily for personal use, held by FDIC-insured partner banks. Although the agreements stated that refund checks for closed accounts would be processed within 14 days, the Company allegedly exceeded this time frame on multiple occasions, causing what the CFPB deemed to be substantial harm to consumers who relied on these funds for essential expenses. The CFPB concluded that the Company’s delays in returning consumer funds constituted an unjust act, violating the Consumer Financial Protection Act.
In response to the findings, the Company and its affiliates were ordered to cease the alleged violations and ensure timely processing of refunds. Within 60 days, the Company must establish a comprehensive compliance plan to rectify its post-closing reimbursement practices, subject to CFPB review. The Company’s board of directors and executives must oversee compliance efforts and report progress annually to the CFPB. Additionally, the Company will pay a civil monetary penalty of $3.25 million to the CFPB’s Victim Relief Fund, with provisions to ensure full compliance and accountability for any failure to meet payment obligations.
Additionally, the consent order requires the Company to implement a redress plan, setting aside $1.3 million within 10 days to compensate affected consumers. The plan outlines procedures for identifying and compensating affected individuals, including mailing checks and compensation notices by specific deadlines. The Company must comply with rigorous reporting and recordkeeping requirements to ensure continued compliance with the consent order.
RESOURCES:
You can view all relevant court documents and press releases on the site CFPB enforcement page.