CFPB Takes Action Against Operator of Sendwave App for Illegally Cheating People on International Money Transfers
The Consumer Financial Protection Bureau (CFPB) today took action against Chime Inc. for deceiving consumers about the speed and cost of remittance transfers through its mobile app, Sendwave. Chime also illegally 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 is ordering Chime to refund affected consumers nearly $1.5 million in fees and pay a $1.5 million penalty into the CFPB’s victims relief fund.
Chime (doing business as Sendwave) is a nonbank fintech company incorporated in Delaware with its principal place of business in Boston. It is a wholly owned subsidiary of WorldRemit, which had total revenues of nearly $400 million in 2021. Through the Sendwave app, consumers are able to send money internationally, primarily to countries in Africa and Asia. Recipients receive the remittance transfers by delivery to a mobile wallet, bank account, or in-person cash pick-up.
Americans typically send remittances to family or other loved ones living abroad. These remittance transfers total in the billions of dollars, and are considered essential services to deliver resources to families in foreign countries.
The CFPB found that Chime violated the Electronic Fund Transfer Act and the CFPB’s Remittance Transfer Rule. Specifically, Chime:
- Forced consumers to waive their legal protections: Sendwave users were required to sign a “remittance services agreement,” which protected Chime from being responsible for losses the consumer incurred through use of the Sendwave app. As part of that remittance services agreement, Chime also limited its liability for damages to $1,000. Both of these provisions illegally restricted consumer rights afforded under the Electronic Fund Transfer Act.
- Made false promises about the speed and cost of remittance transfers: Chime’s marketing on social media platforms deceptively told consumers that Sendwave remittance transfers would be delivered “instantly,” in “30 seconds,” or “within seconds.” In many cases, these transfers took much longer. Chime also misrepresented to consumers how much it would cost to send money from the United States to Nigeria, telling consumers those transfers would incur “no fees” when in fact consumers were charged fees.
- Failed to provide required disclosures: Chime did not accurately disclose the date by which funds would become available to certain recipients, and also failed to accurately represent the exchange rates to the correct decimal as required by law.
- Failed to track, investigate, and resolve errors: Chime did not have proper policies and procedures in place to find and track remittance transfer errors, nor did the company conduct proper investigations upon notification of errors.
- Failed to provide receipts in a timely manner: The Remittance Transfer Rule requires a provider offering remittance transfers solely through a mobile app to provide the consumer with a receipt within one business day of payment. The company would instead wait until funds were electronically delivered to the recipient before providing a receipt, which sometimes took more than a business day.
Since the beginning of 2022, the CFPB has taken numerous actions against other remittance providers, including Choice Money, Servicio UniTeller, and Moneygram. The CFPB has also proposed a new rule that would require nonbank companies, including those providing remittance transfers, to submit their terms and conditions to the CFPB to be included in a public registry. Read more
This is the 31st edition of Supervisory Highlights. This special edition of Supervisory Highlights updates the public on supervisory work completed since the CFPB published the March 2023 Supervisory Highlights Junk Fees Special Edition. The findings included in this report cover examinations in the areas of deposits, auto servicing, and remittances that generally were completed between February 2023 and August 2023. The report also describes risks identified in connection with payment platforms that parents, guardians and students use to pay for school lunches.
As part of its emphasis on fair competition, the Consumer Financial Protection Bureau (CFPB) has launched an initiative, consistent with its legal authority, to scrutinize junk fees charged by banks and financial companies. Junk fees are typically not subjected to the normal forces of competition, leading to excessive costs for services that a consumer may not even want. For example, certain banks and financial companies might hide these unavoidable or surprise charges or disclose them only at a later stage in the consumer’s purchasing process, if at all.
The CFPB has observed that supervised institutions have started to compete more when it comes to fees. In recent years, multiple banks have announced they were eliminating overdraft fees or otherwise updating their policies to be more consumer friendly. And many have announced that they are eliminating non-sufficient fund (NSF) fees on consumer deposit accounts.
Supervision continues to focus significant resources on identifying and eliminating junk fees charged by supervised institutions. Significantly, financial institutions are refunding over $120 million to consumers for unanticipated overdraft fees and unfair NSF fees. This special edition of Supervisory Highlights updates the public on supervisory work completed since the CFPB published the March 2023 Supervisory Highlights Junk Fees Special Edition. In total, for the topics covered in this edition, Supervision’s work has resulted in institutions refunding over $140 million to consumers.
The findings included in this report cover examinations in the areas of deposits, auto servicing, and remittances that generally were completed between February 2023 and August 2023.3 The report also describes risks identified in connection with payment platforms that parents, guardians and students use to pay for school lunches. Additionally, consistent with the statutory requirement for Supervision to identify and consider “risks to consumers” throughout its supervisory program, Supervision has obtained data about certain deposit account fee practices and is sharing key data points that shed light on risks to consumers.