The Consumer Financial Protection Bureau announced that it has entered into a Consent Order with Chime Inc., a nonbank fintech company, to settle alleged violations of the Electronic Fund Transfer Act (EFTA), Subpart B of Regulation E (Remittance Transfer Rule), and the Consumer Financial Protection Act (CFPA).  The Consent Order requires Chime to refund approximately $1.4 million in fees to consumers and pay a $1.5 million civil money penalty to the CFPB.  It is the CFPB’s sixth Consent Order in a case involving remittance transfers since 2019.

Chime provides remittance transfer services through a mobile application, the Sendwave App, that allows users 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.  The CFPB’s findings in the Consent Order include the following:

  • Chime violated the CFPA by misrepresenting in its advertisements that (1) transfers would be delivered “instantly,” in “30 seconds” or “within seconds” when, in fact, transfers were not delivered instantly or within seconds for many consumers, and (2) transfers from the United States would take place “with no fees” when, in fact, consumers were charged fees.
  • Chime violated the EFTA prohibition of waiver provisions in consumer agreements by requiring consumers to sign a service agreement that included (1) indemnity language that constituted a waiver of EFTA rights because it “appears to require consumers waive their private rights of action against [Chime], thereby foreclosing the rights provided to consumers under EFTA Section 916 [to bring a private action against entitles that violate the EFTA], and (2) a limitation on Chime’s liability that constituted a waiver of consumers’ rights under EFTA Section 916  to recover costs and reasonable attorney’s fees in a lawsuit to enforce the EFTA.
  • Because Chime offers remittance transfer services solely through the use of its Sendwave App, the Remittance Transfer Rule requires it to mail or deliver receipts for payment no later than one business day after the date payment is made for a transfer rather than at the time payment is made.  Chime violated this requirement by waiting to electronically deliver the receipt for a transfer until the date funds were actually delivered to the recipient, which took more than one business day for some consumers.
  • Chime violated the Remittance Transfer Rule requirement to promptly investigate and determine whether an error occurred because it failed to identify potential error notices from senders, did not investigate errors, and failed to follow the Remittance Transfer Rule’s error resolution procedures.
  • Chime violated the Remittance Transfer Rule requirements that apply when a transfer provider determines that no error or a different error occurred in response to a notice of error from a sender by failing to consistently provide a written response to consumers that included an explanation of the results of any investigation and to inform senders of their right to request documents that Chime relied on in making its error determinations.
  • Chime violated the Remittance Transfer Rule requirement to maintain written policies and procedures designed to ensure compliance with the Remittance Transfer Rule’s error resolution requirements by, among other things, not having a policy or practice that distinguished notices of error from other sender inquiries and not having polices and procedures that instructed employees on the Remittance Transfer Rule’s error resolution procedures and how to comply with those procedures.
  •  Chime violated the Remittance Transfer Rule requirement to accurately disclose the date of funds availability by incorrectly disclosing as the date of funds availability the date the funds would be received by the recipient bank which was often not the same day as the date the recipient could obtain the funds.
  • Chime violated the Remittance Transfer Rule requirement to accurately disclose the exchange rate by failing to round the exchange rate included on its disclosures to no fewer than two and no more than four decimal places.  Instead, Chime expressed the exchange rate using one decimal place or a whole number.
  • Chime violated the Remittance Transfer Rule requirement to provide contact and cancellation information in equal prominence in disclosures and to use specified terms or substantially similar terms in consumer disclosures.

Curiously, the CFPB states at the end of its press release about the settlement that it “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.”  We assume this is a reference to the CFPB’s proposal issued in January 2023 to create a registry for nonbanks subject to CFPB supervision that use “certain terms or conditions that seek to waive consumer rights or other legal protections or limit the ability of consumers to enforce their rights.”  The CFPB’s statement would suggest that all nonbank companies it supervises use terms that would make registration necessary under its proposal.

Last October, a group of Democratic Senators sent a letter to CFPB Director Chopra to request that the Remittance Transfer Rule be modified to require transfer providers to disclose the true cost of remittance payments so consumers can comparison shop.