The Consumer Financial Protection Bureau (CFPB) has taken action against online payments processor Chime for failing to return funds to customers promptly after account closure.
Although Chime is not a bank itself, the San Francisco-based company partners with banks to offer financial products like checking accounts and credit cards. Chime’s policy dictates that customers should receive refunds by check within 14 days after closing their accounts.
However, upon investigation, the CFPB found that refunds were frequently delayed beyond the 14-day period. There were thousands of instances where Chime took over 90 days to refund its users.
“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,” said CFPB Director Rohit Chopra in a prepared statement. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”
A Configuration Error
Chime attributed the delayed refunds to a configuration error with a third-party vendor it partnered with in 2020 and 2021. That issue was resolved with the vendor, and refunds were issued at the time, according to Chime’s leadership.
The CFPB ordered Chime to return at least $1.3 million to customers affected by delayed refunds. Those customers will receive at least $150 if they still had a minimum unrefunded balance of $10 after 14 days from account closure.
The Bureau also imposed a $3.25 million fine against Chime, which will contribute to the CFPB’s victim relief fund. In addition, Chime will need to comply with regulations and ensure timely refunds going forward.
Adhere to the Same Rules
Chime handles most customer communications and administers consumers’ accounts. The platform has seven million users who collectively perform roughly $8 billion in transactions each month.
The rise of nonbank platforms has spurred the CFPB to take larger steps against fintechs who control financial data. The Bureau has singled out large nonbank companies that handle over five million transactions per year. The CFPB expressly stated it wants those companies to adhere to the same rules as banks, credit unions, and other financial institutions.