Banking and Finance Law Daily Wrap Up, ENFORCEMENT ACTIONS—CFPB assesses over $4 million penalty against Chime Financial over consumer refunds, (May 8, 2024)

By Joe Cox, J.D.

Under a stipulation and consent order, Chime will pay $3.25 million to the Bureau’s victim relief fund and at least $1.3 million to affected consumers.

The Consumer Financial Protection Bureau announced entry of a stipulated consent order in an enforcement action against Chime Financial, Inc. (Chime Financial, Inc., CFPB No. 2024-CFPB-0002 (May 7, 2024)). The enforcement action arose from an alleged pattern of delayed consumer balance refunds after the closure of accounts. Chime had a stated policy of providing balance refunds after an account closed within 14 days. The CFPB found that Chime had failed to meet this obligation, and in fact had sometimes failed to issue refunds within 90 days. Failing to act timely on these refund payments, the CFPB, pursuant to the Consumer Financial Protection Act, initiated an enforcement action resulting in the consent order.

Under the order, Chime Financial neither admits nor denies the allegations raised by the CFPB against it, except to the extent necessary to establish jurisdiction for the action. The order mandates that Chime pay $3.25 million to the CFPB’s victim relief fund and at least $1.3 million to harmed consumers based on the details of the specific cases. Additionally, Chime must act in compliance with applicable law on refunds moving forward.

Background information. Chime Financial is a nonbank company with headquarters in San Francisco. Chime partners with banks to offer financial products like checking accounts, savings accounts and credit cards. The company reports $1.5 billion in annualized revenue. Chime processes account payments via a third-party payment processor. The business also sets and applies policies for servicing accounts, including the 14-day refund timeline at issue in this case.

Additional terms of consent order. The payments discussed above are mandated in the consent order agreed to by the parties. In regard to the funds paid to the affected consumers, most of them will receive $150, although if the refund amount with 30 percent annual interest from 14 days after account closing until the date of payment is greater, those consumers will receive the larger amount.

Within 60 days of the effective date of the Order, Chime is to submit a compliance plan detailing how it will afford further similar issues. A compliance progress report is to be submitted a year after the effective date, detailing Chime’s remedial actions to the CFPB.

Director reacts. “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. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”

Companies: Chime Financial, Inc.

LitigationEnforcement: CFPB ConsumerCredit EnforcementActions