Banking

Brown wants CFPB to investigate reports of Chime account closures

Senate Banking Committee Chairman Sherrod Brown, D-Ohio, urged the Consumer Financial Protection Bureau to address the risks posed by Chime, a San Francisco fintech that sparked a backlash this year after closing consumer accounts without warning.

Brown sent a letter to acting CFPB Director Dave Uejio Tuesday urging him to address the problems at Chime and other digital-only financial companies that claim to provide financial services to people not served by traditional banks.

Chime launched a broad marketing campaign this year by promising to speed up payments from federal stimulus checks and unemployment insurance, only to abruptly shutter some accounts while alleging fraudulent activity.

“Chime’s abrupt, involuntary closures of its customers’ accounts — and locking them out of access to their funds — can cause lasting damage to their financial condition,” Brown wrote. “There are a number of consumer risks involving nonbanks, from privacy concerns, fraud, data breaches, and proper disclosure that these companies are not actually banks.”

“Chime’s abrupt, involuntary closures of its customers’ accounts — and locking them out of access to their funds — can cause lasting damage to their financial condition,” said Sen. Sherrod Brown, D-Ohio.

Bloomberg News

The nonprofit news organization ProPublica reported this month that many Chime customers had their accounts closed without warning and were unable to access their money. Some consumers were put at risk of losing their homes to eviction or foreclosure when they were shut out of their accounts, Brown said.

Chime is not a bank but has marketed itself erroneously as a bank and come under fire for doing so.

The San Francisco-based company was forced to ditch the use of the word “chimebank” in its website address, after California’s Department of Financial Protection and Innovation said it violated state law. Chime was also using the terms “bank” and “banking” elsewhere in its advertisements, the California agency said in a March settlement agreement with Chime.

In addition, the Illinois Department of Financial and Professional Regulation included a $200,000 fine in a similar order against Chime, according to a March 25 settlement agreement.

The largest so-called neobank, Chime has roughly 12 million customers. It has received 1,077 complaints since the coronavirus pandemic began in March 2020, according to the CFPB’s searchable complaint database.

A spokeswoman for Chime did not immediately respond to a request for comment.

Chime is not the only neobank to be called out by consumers for abruptly closing accounts. A number of consumers recently lashed out at Varo online for closing their accounts unexpectedly without a clear explanation.

Brown specified that he wants the CFPB to share its insights about the risks that neobanks pose to consumers and the measures that the CFPB is taking to address those risks.

He also asked Uejio to provide guidance on “any gaps in the regulatory framework that may require Congressional action.”



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