Chime Fined Millions For Not Refunding Customers Fast Enough

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Chime Fined Millions For Not Refunding Customers Fast Enough

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The Consumer Financial Protection Bureau has ordered Chime to pay $4.55 million for failing to issue timely refunds.

Thousands of Chime customers who closed their accounts were stranded without balance refunds for weeks to months. Despite promising to issue refunds within 14 days of account closure, the financial technology (fintech) company kept many consumers’ funds for 90 days or more past account closure. Due to the financial harm inflicted upon consumers, Chime agreed to pay $1.3 million to affected customers and $3.25 million to the CFPB’s victim relief fund.

Why Chime Was Fined

Chime, which partners with banks to offer online banking products, is responsible for servicing and creating policies for consumer accounts opened through its platform. This includes processing account payments via a third-party payment processor and overseeing customer communications. Chime’s own policy, until 2021, was to refund account balances by mailed check within 14 days of a customer closing their checking or savings account.

Chime failed to comply with this policy thousands of times, often leaving customers without a way to access the money in their accounts for 90 days or more. According to the CFPB, this may have left some customers unable to afford basic living expenses, forcing them to turn to credit cards or payday loans to make ends meet.

“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 recent news release. He went on to warn fast-growing financial firms not to take federal law lightly.

In a statement to PYMNTS about the settlement, Chime explained the cause of the delayed refunds as a “configuration error” with a third-party vendor the company used from 2020 to 2021, an issue it has since worked to resolve. Chime agrees with the CFPB’s decision and commented: “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.”

What Happens Next

In addition to ordering Chime to issue refund checks within a reasonable timeframe as set forth in the Consumer Financial Protection Act (CFPA) of 2010, the CFPB is requiring Chime to submit a redress plan within 60 days.

This plan must detail how Chime will identify consumers who qualify for compensation and distribute its $1.3 million in redress. After the CFPB approves this plan, all checks and redress notices must be sent within 60 days.

What Chime Customers Can Expect

If you closed a Chime account that had a balance of $10 or less 14 days after closure, you are subject to $25 in compensation. If you closed an account that had a balance greater than $10, you’ll receive either 30% interest on the amount of your refund check (starting 14 days after closure and ending the date Chime processed your check) or $150—whichever is greater.

Moving forward, Chime will update its practices to comply with the Consumer Financial Protection Act of 2010 and must provide consumers with refunds within a reasonable period. However, the CFPB has not defined a “reasonable period” for refunds.

What Is the CFPB’s Victim Relief Fund?

The Civil Penalty Fund, which was created in 2010 by the CFPA, works to help victims of unfair and unlawful treatment by companies. You may be eligible for compensation through this fund if you:

Have been affected by a case brought to the CFPB that ended in the company being fined
Are not eligible to receive full compensation directly from the company fined

What Is Chime?

Chime is a fintech that offers free banking products and services in partnership with The Bancorp Bank and Stride Bank. Both of these banks are insured by the Federal Deposit Insurance Corporation or FDIC. Chime boasts no overdraft fees, monthly service fees or minimum balance requirements on its digital accounts. The company’s revenue comes from Visa transactions when members use their Chime cards.