Payments
In Re: Chime Inc. d/b/a Sendwave
Date: October 17, 2023
Issue: Chime Inc.’s consent order with the Consumer Financial Protection Bureau (CFPB) over allegations that its subsidiary app violated the Electronic Fund Transfer Act (EFTA).
Case Summary: Chime Inc. agreed to pay $3 million to resolve CFPB allegations that its subsidiary mobile app (Sendwave) illegally restricted consumer rights under the EFTA.
Chime, a nonbank fintech company, offers and provides international money transfers to consumers known as “remittance transfers” Sendwave enables users to send money to several countries mainly in Africa and Asia. Recipients receive remittance transfers by delivery to a mobile wallet, bank account, or through in person cash pick-up.
CFPB alleged Chime violated the EFTA and the Remittance Transfer Rule (RTR). First, CFPB alleged Chime forced consumers to waive their legal protections. Sendwave users were allegedly required to sign a “remittance service agreement” which protected Chime from being responsible for losses the consumer incurred using Sendwave. Further, CFPB claimed Chime limited its liability for damages to $1,000. CFPB emphasized both provisions illegally restricted consumer rights under the EFTA. Moreover, CFPB alleged Chime made false promises about the speed and cost of remittance transfers. According to CFPB, Chime’s marketing on social media platforms deceptively told consumers Sendwave remittance transfers would be delivered “instantly” or “within seconds.” In many cases, remittance transfers took longer than advertised. Chime also allegedly misrepresented to consumers how much it would cost to send money from the United States to Nigeria. Consumers were allegedly charged fees after Chime informed them no fees would be incurred.
CFPB also alleged Chime failed to provide required disclosures. CFPB claimed Chime did not accurately disclose the date by which funds would become available to certain recipients and also failed to accurately represent exchange rates to the correct decimal as the law required. Moreover, CFPB alleged Chime failed to track, investigate, and resolve errors. According to CFPB, Chime did not have proper policies and procedures in place to find and track remittance transfer errors. CFPB also claimed Chime did not conduct proper investigations upon notification of errors. Finally, CFPB alleged Chime failed to provide receipts on time. RTR requires providers offering remittance transfers to provide the consumer with a receipt within one business day of payment. CFPB claimed Chime would wait until funds electronically delivered to the recipient to provide a receipt.
Under the consent order terms, Chime agreed to refund $1.5 million in fees to affected consumers. CFPB categorized affected consumers as any consumer who sent remittance transfers from the United States to Nigeria from Nov. 1, 2021, to Dec. 31, 2022 (the time Chime allegedly marketed its transfers as fee free). Chime also agreed to refund any fees consumers paid when Sendwave promised delivery by a certain date but failed to provide funds to the recipient during the specified period. Chime also agreed to pay a $1.5 million penalty to CFPB. Chime did not admit or deny any of CFPB’s findings.
Bottom Line: In January, CFPB proposed a public registry of supervised nonbanks’ terms to identify risky contracting practices and police violations.
Documents: Consent Order
