Chime, the largest digital bank in America, has been fined $3.25 million by the Consumer Financial Protection Bureau (CFPB) for long delays in providing refunds to customers after their accounts were closed, sometimes without their consent. The 12-year-old San Francisco-based company partners with Bancorp Bank and Stride Bank to offer banking products such as checking accounts, savings accounts, credit cards, and personal loans. The CFPB has fined multiple fintech companies in the past for violations of consumer protection laws.
The CFPB’s press release states that Chime must compensate affected customers with at least $1.3 million in addition to the $3.25 million fine paid to the CFPB’s victims relief fund. According to a consent order between Chime and the CFPB, the bank took longer than 90 days to issue refund checks in thousands of instances. The order highlights that Chime’s customers often rely on their accounts for everyday expenses like groceries and housing, and delays in refunds can result in financial hardship for these individuals.
Chime issued a statement attributing the delays to a configuration error with a third-party vendor during 2020 and 2021. The company emphasized the importance of timely customer service, especially during the challenges posed by the pandemic. Fraud spiked during the pandemic, leading Chime to close numerous accounts to combat fraudulent activities. Some of the fraud was reportedly committed by regular customers facing financial difficulties. Chime claims that its rate of closing accounts due to fraud has decreased by more than 50% from 2021.
As part of the settlement with the CFPB, Chime agreed to make payments to customers if it took more than 14 days to process a refund check after their accounts were closed. Customers with balances of $10 or less will receive $25, while those with larger amounts will get at least $150. The consent order requires Chime to develop a compliance plan to ensure that its post-closure refund practices comply with consumer protection laws. Chime will be under CFPB oversight for five years and must provide progress reports to the agency.
In addition to the CFPB settlement, Chime also reached a $2.5 million agreement with the California Department of Financial Protection and Innovation (DFPI) in February 2024. This settlement pertained to Chime’s responsiveness to customer complaints between January and March 2021. A Chime spokesperson stated that the company had already implemented reforms identified by the DFPI and was pleased to have resolved the matter. Despite the regulatory challenges, Chime remains one of the leading digital banks in the United States, serving a large customer base with various financial products and services.
