According to the CFPB, Chime's policy up until 2021—which was mirrored in customer account agreements—was to process and ship refund cheques 14 days after an account was closed.

The regulator, however, asserts that it discovered "thousands of instances in which Chime did not get refunds to consumers within 90 days" and that "thousands of consumers waited for weeks or even months for balance refunds" after terminating their accounts.

According to the report, affected customers "probably had to use or search for expensive credit alternatives, such as credit cards or payday loans, and were often unable to pay for basic living expenses."

Offering financial products such as credit cards, savings accounts, and checking accounts, Chime collaborates with two FDIC-insured partner banks. It also handles account activities, including payment processing, through a third-party payment processor.

"The majority of the delayed refunds were caused by a configuration error with a third-party vendor during 2020 and 2021," Chime claims in a statement.

"As soon as Chime found out about the problem, we collaborated with our provider to fix it and gave the affected customers refunds. The fintech continues, "We support the Bureau's objective of establishing a more accessible and competitive financial sector that benefits regular people.

"Despite the particular challenges posed by the pandemic, we continue to believe that prompt handling of customer matters is critical, as evidenced by our settlement agreement with the CFPB."

Chime furthermore has to pay "at least $1.3 million in redress to harmed consumers" in addition to the punishment, which is to be deposited into the CFPB's victims relief fund.

Director of the CFPB Rohit Chopra said, "Chime's customers were forced to use alternative funds to cover their essential expenses and had to wait weeks or months for access to their own money."

He continues, "Fast-growing financial firms must understand that federal law is not a suggestion and treat their customers fairly."