The Consumer Financial Protection Bureau slapped the San Francisco technology firm Digit, a unit of the consumer lender Oportun, with a $2.7 million fine for failing to prevent consumers from triggering overdraft fees on their bank accounts. The agency also said the company pocketed interest on consumers’ checking accounts.
Digit engaged in deceptive acts or practices by using an algorithm that routinely caused customers’ checking accounts to overdraft, the CFPB said Wednesday in a consent order. The mobile savings app pioneer did not always reimburse consumers for overdraft fees, the CFPB said.
Digit’s automated savings tool uses algorithms to monitor checking accounts with low balances. It then transfers small amounts of money from a checking account to a savings account, allegedly without interfering with its customers’ other charges or with paying bills. But consumers with little cushion in their checking accounts ran into trouble.
The company received 70,000 complaints about overdraft fees since 2017, the CFPB said.
“Digit positioned itself as a savings tool for consumers having trouble saving on their own. But instead, consumers ended up paying unnecessary overdraft fees,” CFPB Director Rohit Chopra said in a press release. “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.”
Digit, which was founded in 2013, offers banking services through a bank partner, the $6.9 billion-asset MetaBank in Sioux Falls, South Dakota, that sold its name to Facebook in a deal with Meta Platforms last year. The CFPB referred to the company as Hello Digit, although it does business as Digit.
Digit was sold in December for roughly $213 million to Oportun, a Silicon Valley lender that offers personal loans and credit cards. The CFPB opened its investigation into Digit in 2020 and Oportun discussed the CFPB probe during the acquisition process, an Oportun spokeswoman said.
In addition to the $2.7 million fine, Digit was ordered to reimburse customers for overdraft fees and interest. Digit said it owes roughly 1,950 customers about $35 each for overdraft charges, or approximately $68,000.
“While we disagree with the CFPB on this matter, we are happy to have it settled,” Oportun’s spokeswoman said.
The CFPB said that Digit falsely guaranteed its customers that they would never pay overdraft fees. The company said its automated savings tool “never transfers more than you can afford,” and that it provided a “no overdraft guarantee.”
In addition, the bureau said that Digit deceived consumers by claiming that it did not keep any interest earned on consumer funds that it was holding.
“In fact, the company kept a significant amount of the interest earned,” the CFPB said in its press release, adding that had the company “kept its promise not to keep the interest on consumers’ funds, consumers could have pocketed the extra savings .”
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