Senate Banking Chair Asks CFPB How It Plans to Address Risks of Chime and Other Banking Apps

Suwaree Tangbovornpichet/

With an estimated 12 million customers, Chime is the largest in its highly competitive subcategory of financial technology companies that serve low- to moderate-income individuals.

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

The chair of the Senate Banking, Housing, and Urban Affairs Committee is calling for the Consumer Financial Protection Bureau to evaluate the risks associated with apps that provide banking services, citing ProPublica’s article on Chime, the most widely downloaded of those apps.

In a letter sent today, Sherrod Brown, D-Ohio, wrote to the CFPB’s acting director, Dave Uejio, stating that “Chime’s abrupt, involuntary closures of its customers’ accounts” call for further “insight into the risks posed by nonbanks to consumers as well as the measures the Bureau is taking to address the risks by nonbank fintech companies and their affiliated banks.”

The letter asserted that “Chime’s account closures may increase the number of people in this country who do not have access to the financial services” they need. Being shut out of a banking app, the letter noted, “can cause lasting damage” to a person’s financial condition.

Earlier this month, ProPublica reported that Chime, which provides checking and savings accounts via an app — but isn’t actually a bank — has racked up an unusually large number of consumer complaints about locked accounts, inaccessible funds and slow resolution time. At the time of that article’s publication, Chime customers had filed 920 complaints with the federal Consumer Financial Protection Bureau since April 15, 2020. Customers had also filed 4,439 complaints against Chime at the Better Business Bureau, compared to 3,281 for Wells Fargo, a bank with six times as many customers.

With an estimated 12 million customers, Chime is the largest in its highly competitive subcategory of financial technology, or fintech, companies that serve low- to moderate-income individuals underserved by traditional financial institutions. Many of the account closures occurred as the company was experiencing a dramatic surge in new accounts. Chime was vying to land new accounts from customers who were receiving government stimulus checks, while simultaneously trying to vet millions of new accounts for suspicious payments. Customers with legitimate government funds were sometimes caught in the middle and left unable to pay bills or at risk of eviction.

In the article, Chime acknowledged some mistaken account closures, but otherwise defended what it said were aggressive efforts to combat an “extraordinary” rise in deposits made using fraudulently obtained payments for unemployment insurance and other forms of government assistance. The company has resolved most CFPB complaints privately and responded on the BBB website that it “takes these issues seriously.”

Brown’s letter noted that an involuntary account closure can then make it harder to open another account: “This all but ensures that the most financially vulnerable of America are denied basic financial services.” Brown also requested “guidance on any gaps in the regulatory framework that may require Congressional action.”

Chime has previously attracted the attention of state regulators. In late 2019, the California Department of Financial Protection and Innovation concluded that Chime had violated state law by describing itself as a bank on its website and elsewhere. DFPI and Chime agreed to an administrative settlement in late March. Chime neither admitted to nor denied the findings but agreed to take a detailed series of actions on its website and in promotional materials to make clear that it is not a bank. (A similar agreement was also reached with regulators in Illinois.)

Chime’s homepage still reads “Banking That Has Your Back” in bold, black lettering. Scroll down and below the “Apply Now” button, in much smaller type, the site reads: “Chime is a financial technology company, not a bank.” The company previously told ProPublica that it is complying with the terms of its settlement with the state of California.