Consumers sending money to their families overseas were deceived by Sendwave, an app operated by Chime Inc., and face $3 million in fines and penalties, according to the Consumer Financial Protection Bureau (CFPB).
The agency said that Sendwave misled its customers about the speed and cost of its money transfers, and also illegally forces consumers to give up their legal rights while failing to provide them 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.
“Sendwave put illegal fine print into their contracts and tricked people who were sending money to their family overseas,” said CFPB Director Rohit Chopra. “The CFPB is carefully watching companies launching mobile payment transfer apps seeking to gain an unfair advantage over their law-abiding competitors.”
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.
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.
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.
Other remittance providers charged
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.
The CFPB’s order requires Chime to:
- Refund fees to affected consumers: Chime must refund certain charges to consumers who sent remittance transfers from the United States to Nigeria during the time Chime was deceptively marketing its transfers as fee-free. Chime must also refund any fees consumers paid when the Sendwave app promised delivery by a certain date and then failed to deliver the funds to the designated recipient by that date.
- Pay $1.5 million into the CFPB victims relief fund: Chime is required to pay a $1.5 million penalty, which will be deposited into the CFPB victims relief fund.
The CFPB has more information on money transfers on its website, including what a consumer’s rights are when sending money abroad. Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).