Chime Financial and CFPB Reach Settlement on Delayed Balance Refunds
Chime Financial will pay at least $1.3 million in redress to consumers and $3.25 million in penalties as part of a settlement with the Consumer Financial Protection Bureau (CFPB).
The CFPB found that the nonbank company illegally delayed customer refunds when customers closed their accounts, withholding these balance refunds longer than the 14 days its policy specified until 2021, the CFPB said in a Tuesday (May 7) press release.
In thousands of instances, consumers had to wait more than 90 days to get their balance refunds, the agency said in the release.
The CFPB noted that Chime Financial partners with banks to offer financial products, contracts with a third-party payment processor to process accounts’ payments, and sets and applies policies and procedures itself, with the review and approval of its partner banks.
“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,” CFPB Director Rohit Chopra said in the release. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”
Reached by PYMNTS, Chime Financial said in an emailed statement that its settlement 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,” the statement said. “When Chime discovered the issue, we worked with our vendor to resolve the error and issued refunds to impacted customers.”
Chime Financial added in the statement that it shares the CFPB’s goal to create a more competitive and accessible financial landscape, looks forward to continuing this mission and is pleased to have resolved this matter.
In addition to requiring the redress and penalties, the CFPB’s order also requires Chime Financial to “come into compliance with the law, including providing refund checks on closed accounts within a reasonable period.”
This settlement comes at a time when Chime Financial is reportedly mulling an initial public offering (IPO) next year. The firm is one of the standouts in the neobank sector, as it has achieved profitability and as valuation rounds point to what might be a sanguine outlook for the firm, PYMNTS reported March 26.
The post Chime Financial and CFPB Reach Settlement on Delayed Balance Refunds appeared first on PYMNTS.com.