The Consumer Financial Protection Bureau (CFPB) has fined Hello Digit $2.7m due to a faulty algorithm that wrongfully took money from users’ checking accounts.
According to Finextra, the Bureau has ordered the automated savings app to pay damages to customers for the problems caused by the algorithm, which led to overdraft penalties for those who had money taken away.
Hello Digit currently charges a $5 monthly subscription fee for its personal finance management app designed to help people put money aside for things such as vacations and rainy days.
The Hello Digit app uses an 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 the firm access to their checking accounts.
However, the CFPB said the company falsely claimed it would not cause users’ checking accounts to incur overdraft fees and it failed to live up to irs promise that if there was an overdraft fee it would reimburse the customer.
The CFPB added that 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.
CFPB director Rohit Chopra said, “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. 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.”
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