Hello Digit fined $2.7 million for faulty overdrafts, not returning overdraft fees, and keeping interest due consumers
Hello Digit, a financial technology company that used a faulty algorithm that caused overdrafts and overdraft penalties for customers, is being required to return money to consumers and pay a fine of $2.7 million.
Hello Digit was supposed to save people money, but instead the 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, the Consumer Financial Protection Bureau said.
“Hello Digit positioned itself as a savings tool for consumers having trouble saving on their own,” said Rohit Chopra, director of the bureau. “But instead, consumers ended up paying unnecessary overdraft fees.”
In December 2021, Hello Digit was acquired by Oportun Financial Corp., a small-dollar lending company. Hello Digit offers a personal-finance-management app that promotes automated savings.
When consumers sign up for the service, Hello Digit 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 for the benefit of the consumers.
As part of the sign-up process, consumers are required to give Hello Digit access to their checking accounts. Hello Digit then uses its algorithm to analyze consumers’ checking-account data to determine when and how much to save for each consumer. The company charges consumers a subscription fee of $5 a month for its service.
The agency found that Hello Digit engaged in deceptive acts or practices, violating the Consumer Financial Protection Act. The bureau found that the company:
- Falsely guaranteed no overdrafts: Hello Digit said that its tool “never transfers more than you can afford,” and it provided a “no overdraft guarantee.” However, Hello Digit routinely caused consumers’ checking accounts to get overdraft fees charged by their banks. Hello Digit received complaints about overdrafts daily.
- Broke promises to correct its mistakes: The company also stated that if there was an overdraft, it would reimburse consumers. But the company often denied customers who tried to get their money back. The company has received nearly 70,000 overdraft-reimbursement requests since 2017.
- Pocketed interest that should have gone to consumers: As of mid-2017, Hello Digit deceived consumers when it represented that it wouldn’t keep any interest earned on consumer funds that it was holding, when the company actually kept a significant amount of the interest earned. Had Hello Digit kept its promise to not keep the interest on consumers’ funds, consumers could have pocketed the extra savings.