Hello Digit Hit By $2.7M CFPB Fine Over Fees Connected to Automated Savings

A faulty algorithm caused overdraft penalties for automated savings withdrawals for customers of Hello Digit and it has neglected to make good on promises, the Consumer Financial Protection Bureau (CFPB) said in an enforcement action on Wednesday (Aug. 10).

The order requires Hello Digit to pay damages to its harmed customers as well as a $2.7 million fine for charging people overdraft fees in a savings product that falsely guaranteed no overdrafts, according to a press release.

“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,” said Rohit Chopra, Director of the CFPB.

“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,” Chopra said.

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The company is further charged with breaking its promises to make amends and pocketing a portion of the interest that should have gone to consumers, per the release.

Hello Digit uses a proprietary algorithm to make automatic transfers from the consumer’s checking account, called “auto-saves,” for a $5 monthly subscription fee. Part of the sign-up process includes requiring consumers to grant the company access to its checking account. The deductions are intended to help people save money.

The CFPB said it discovered that Hello Digit falsely guaranteed no overdrafts and broke promises to make good on its errors. The company has received nearly 70,000 overdraft-reimbursement requests since 2017, the CFPB said.

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The company is also accused of taking interest that should have gone to consumers, the CFPB said. Since mid-2017, Hello Digit reportedly said it would not keep any interest earned on consumer funds that it was holding, but it instead held a significant amount of the interest earned.