CFPB acts against Chime Financial over delayed refunds

Chime headquarters in San Francisco.
Editorial credit: JHVEPhoto / Shutterstock

The Consumer Financial Protection Bureau (CFPB) has taken action against Chime Financial for failing to alert consumers of timely refunds when their accounts were closed.

Following instances where customers had to resort to costly forms of credit to settle overdue bills, the CFPB has ordered Chime to provide a minimum of $1.3m in restitution to affected consumers. Additionally, Chime is required to pay a $3.25m penalty to the CFPB’s victims relief fund.

The CFPB discovered that thousands of consumers experienced lengthy delays, which  spanned weeks or even months in receiving balance refunds after closing their accounts. This failure caused significant financial harm for consumers who relied on these funds to cover essential expenses and make ends meet.

Rohit Chopra, Director of CFPB, commented: “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. Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”

The San Francisco-based company operates as a ‘nonbank’ that works with banks to offer financial products like checking and savings accounts, along with credit cards. With $1.5bn in annualised revenue, Chime serves around seven million consumers who make $8bn in monthly transactions using Chime cards.

The nonbank is responsible for processing accounts’ payments, which it does by contracting with a third-party payment processor. Chime takes charge of most consumer communications regarding accounts and establishes, enforcing servicing policies and procedures, which are subject to review and approval by its partner banks.

In addition to the monetary enforcement action, Chime has been ordered to ensure compliance with the law, which includes issuing refund checks promptly to customers with closed accounts.

Following this enforcement, Chime Financial has provided a comment to Payment Expert.

“Chime was founded on the belief that basic banking services should be helpful, easy, and free. Today, together with our bank partners, we offer easy-to-use products that allow everyday people living paycheck-to-paycheck to bank with no monthly, overdraft or hidden fees, get paid early, and safely build credit. Our innovations have disrupted the status quo in banking, empowering consumers with more control over their financial lives.

“Our settlement agreement with the CFPB reflects our belief that the timely handling of customer matters is critical, even amid the pandemic’s unique challenges. In this case, the majority of the delayed refunds were caused by a configuration error with a third-party vendor during 2020 and 2021.

“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.”

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