On August 10, 2022, the CFPB filed a consent order against Hello Digit, LLC for using a faulty algorithm that caused overdrafts and overdraft penalties for customers. According to the CFPB, the financial technology company falsely guaranteed no overdrafts with its product, broke its promises to make amends on its mistakes, and pocketed a portion of the interest that should have gone to consumers.
Hello Digit is a fintech company which offers a personal-finance-management app that promotes automated savings. As part of the sign-up process, consumers are required to grant Hello Digit access to their checking accounts so that the app can make automatic transfers from the consumer’s checking account to an account held in Hello Digit’s name for the benefit of the consumers. The company uses an algorithm to analyze consumers’ checking-account data to determine when and how much to save for each consumer.
The CFPB found that Hello Digit engaged in deceptive acts or practices, violating the Consumer Financial Protection Act. In particular, the CFPB found that the company:
Falsely guaranteed no overdrafts. Contrary to its promise to its customers, Hello Digit routinely caused consumers’ checking accounts to incur overdraft fees charged by their banks.
Broke promises to make whole on its mistakes. The company guaranteed to reimburse consumers for overdraft fees. However, the company often denied customers who tried to recoup their money.
Pocketed interest that should have gone to consumers. As of mid-2017, the company deceived consumers when it stated that it would not keep any interest earned on consumer funds, but in reality it kept a considerable amount of interest.
Through the consent order, the CFPB requires Hello Digit to:
Provide redress to consumers.
Pay a $2.7 million penalty, which will be deposited into the CFPB’s victims relief fund.
Read the CFPB’s press release here.
The consent order can be found here.