Washington DC – The Consumer Financial Protection Bureau (CFPB) today took action against Chime Inc. for misleading consumers about the speed and cost of sending money through its mobile app Sendwave. Chime also unlawfully forced consumers to waive their legal rights, failed to provide consumers with legally required disclosures and receipts, and failed to properly investigate consumer disputes and errors. The CFPB has ordered Chime to refund approximately $1.5 million in fees to affected consumers and pay a $1.5 million penalty to the CFPB’s Victim Relief Fund.
“Sendwave placed illegal fine print in contracts to defraud people who were sending money to their families overseas,” said CFPB Director Rohit Chopra. “The CFPB is closely monitoring companies that launch mobile payment transfer apps in an attempt to gain an unfair advantage over law-abiding competitors.”
Chime (doing business as Sendwave) is a non-bank fintech company incorporated in Delaware with principal offices in Boston. The company is a wholly owned subsidiary of WorldRemit and had total revenues of approximately $400 million in 2021. Through his Sendwave app, consumers can send money internationally, mainly to countries in Africa and Asia. Recipients receive money via mobile wallet, delivery to their bank account, or direct cash pickup.
Americans typically send money to family and loved ones living abroad. These remittances total billions of dollars and are considered an essential service in getting resources to families abroad.
The CFPB found that Chime violated the Electronic Funds Transfer Act and the CFPB’s money transfer rules. Specifically, chime:
- Forcing consumers to waive legal protections: Sendwave users were required to sign a “Money Transfer Services Agreement” that held Chime free from liability for losses consumers suffered as a result of using the Sendwave app. As part of the money transfer service agreement, Chime limited her liability for damages to $1,000. Both of these provisions unlawfully limited consumer rights afforded under the Electronic Funds Transfer Act.
- Made false promises regarding transfer speeds and costs. Marketing on Chime’s social media platforms deceived consumers into believing that Sendwave transfers would be delivered “instantly,” “in 30 seconds,” or “within seconds.” Often these transfers took much longer. Chime also lied to consumers about the cost of sending money from the U.S. to Nigeria, telling consumers that the money transfers would be “free of charge” when in fact they were being charged a fee. I told you.
- Failed to provide required disclosure: Chime did not accurately disclose the dates on which funds would be available to specific recipients, nor was it able to accurately express exchange rates to the correct decimal point as required by law.
- Failed to track, investigate, or resolve error: Chime did not have adequate policies and procedures in place to detect and track remittance errors, nor did it properly investigate notifications of errors.
- Failure to submit receipts in a timely manner: The Money Transfer Regulation requires providers offering money transfers exclusively through mobile apps to provide consumers with a receipt within one business day of payment. Instead, the company waited until the funds were delivered electronically to the recipient before issuing a receipt, which could take more than a business day.
Since the beginning of 2022, the CFPB has taken numerous actions against other money transfer providers such as Choice Money, Servicio UniTeller, and Moneygram. The CFPB is also proposing new rules that would require nonbank companies, including those providing money transfer services, to submit to the CFPB the conditions for registration on public registries.
enforcement action
Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against institutions that violate consumer financial laws, including unfair, deceptive, or abusive acts or practices. The CFPB found that Chime misrepresented the speed and cost of transfers to consumers, violating the CFPA’s prohibitions against deceptive acts and practices. Chime also violated the Electronic Funds Transfer Act and the Money Transfer Regulation by failing to comply with error resolution requirements, provide timely information required for disclosure, and maintain required policies and procedures.
The CFPB’s order requires Chime to:
- Refund fees for affected consumers: Chime must refund certain fees to consumers who sent remittances from the United States to Nigeria during a period in which it deceptively advertised that the transfer fees were free. Chime must also refund fees paid by consumers if the Sendwave app promises delivery by a certain date but fails to deliver funds to the designated recipient by that date. It doesn’t have to be.
- Pays $1.5 million to CFPB Victim Relief Fund: Chime must pay a $1.5 million fine, which will be deposited into the CFPB Victim Relief Fund.
Read today’s orders for Chime.
The CFPB’s website has more information about money transfers, including consumer rights when sending money abroad. Consumers can file complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees of companies that believe their companies are violating federal consumer financial laws are encouraged to send information they know to whistlebwer@cfpb.gov.
The Consumer Financial Protection Bureau (CFPB) helps consumer financial markets function by making rules more effective, enforcing them consistently and fairly, and giving consumers more control over their financial lives. It is a 21st century institution. For more information, please visit: www.consumerfinance.gov.