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Hello Digit fined $2.7m after algo caused customers overdraft fees

Hello Digit fined $2.7m after algo caused customers overdraft fees

The Consumer Financial Protection Bureau has fined Hello Digit and ordered the automated savings app to pay damages to customers after finding that a faulty algorithm wrongfully took money from users' checking accounts leading to overdraft penalties.

Hello Digit charges a $5 monthly subscription fee for its personal finance management app designed to help people put money aside for things like vacations and rainy days.

The app 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. As part of the sign-up process, customers are required to grant Hello Digit access to their checking accounts. The firm then uses its algorithm to analyse checking account data to determine when and how much to save for each person.

But, the CFPB says that the company falsely claimed it would not cause users' checking accounts to incur overdraft fees. In addition, it failed to live up to its promise that if there was an overdraft fee it would reimburse the customer.

Finally, says the CFPB, as of mid-2017, Hello Digit deceived consumers when it represented that it would not keep any interest earned on consumer funds that it was holding, when in fact the company kept a significant amount of the interest earned.

Hello Digit - which late last year was acquired by small-dollar lending firm Oportun Financial Corporation - has been ordered to pay reimbursement requests for overdraft charges that it previously denied and been fined $2.7 million.

“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,” says 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.”

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 August, 2022, 12:40Be the first to give this comment the thumbs up 0 likes

$2.7M fine. LOL.

Yet another case of regulators puffing up their chests and bragging about doing all kinds of things when all they have done is slap a fine that's so puny that it's a rounding error on the valuation of the fined party. 

Reminds me of the concluding line of a FORTUNE magazine article about the $200M fine levied on food giant Archer-Daniels-Midland 20+ years ago: "Not only does crime pay, it’s just the cost of doing business."