Hello Digit Fined $2.7 Million by Consumer Bureau

Advocate Andy

Fintech company made false promises, depleted customer checking accounts

The Consumer Financial Protection Bureau (CFPB) initiated an enforcement action against fintech company Hello Digit as a result of that company's false promises to consumers. The action requires Hello Digit to pay $2.7 million. Hello Digit is accused by CFPB of guaranteeing customers who used their product that they would not face overdrafts. Instead, the app promised to help customers reach savings goals.

The CFPB released a statement outlining the nature of Hello Digit's misconduct.

“Hello Digit positioned itself as a savings tool for consumers having trouble saving on their own. But instead, consumers ended up paying unnecessary overdraft fees,” said CFPB Director Rohit Chopra. “Companies have long been held to account when they engage in faulty advertising, and regulators must do the same when it comes to faulty algorithms.”

Hello Digit uses a proprietary algorithm to make automatic transfers from the consumer’s checking account, called “auto-saves,” to an account held in Hello Digit’s name for the benefit of the consumers. The tool is meant to help people put aside money for vacations or rainy days.

The CFPB investigation found that not only did Hello Digit debit checking accounts when balances were low, resulting in overdraft fees, but the company also fraudulently pocketed interest that should have been paid to customers.

Hello Digit represented that its tool “never transfers more than you can afford,” and it provided a “no overdraft guarantee.” But instead, Hello Digit routinely caused consumers’ checking accounts to incur overdraft fees charged by their banks. Hello Digit received complaints about overdrafts daily.

The enforcement action requires Hello Digit to:

  • Provide redress to consumers: Hello Digit must pay reimbursement requests for overdraft charges that it previously denied.
  • Pay a $2.7 million fine: Hello Digit must pay a $2.7 million dollar penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.

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Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

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