CFPB Fines Mobile Savings App Digit $2.7 Million for Overdraft Charges

SOURCE: American Banker

The Consumer Financial Protection Bureau slapped the San Francisco technology firm Digit, a unit of the consumer lender Oportun, with a $2.7 million fine for failing to prevent consumers from triggering overdraft fees on their bank accounts. The agency also said the company pocketed interest on consumers' checking accounts.

Digit engaged in deceptive acts or practices by using an algorithm that routinely caused customers' checking accounts to overdraft, the CFPB said Wednesday in a consent order. The mobile savings app pioneer did not always reimburse consumers for the overdraft fees, the CFPB said.

Digit's automated savings tool uses algorithms to monitor checking accounts with low balances. It then transfers small amounts of money from a checking account to a savings account, allegedly without interfering with its customers' other charges or with paying bills. But consumers with little cushion in their checking accounts ran into trouble.

The company received 70,000 complaints about overdraft fees since 2017, the CFPB said. 

"Digit positioned itself as a savings tool for consumers having trouble saving on their own. But instead, consumers ended up paying unnecessary overdraft fees," CFPB Director Rohit Chopra said in a press release. "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."