CFPB Hits Fintech Giant Wise with Fines Over Deceptive Fee Practices
The Consumer Financial Protection Bureau (CFPB) has recently imposed a significant penalty on the U.K.-based remittance service, Wise, amounting to approximately $2 million. This fine stems from a series of alleged illegal activities related to customer transparency and fee disclosures.
CFPB’s Findings Against Wise
The CFPB’s investigation revealed that Wise engaged in **misleading advertising** practices. Specifically, the agency outlined the following issues:
- Inaccurate Fee Advertising: Wise reportedly advertised fees that were not accurate.
- Improper Exchange Rate Disclosures: The company failed to adequately disclose exchange rates and additional costs associated with transactions.
- Delayed Refunds: When transfers were not completed on time, Wise did not refund remittance fees promptly as required by law.
The CFPB stated these actions resulted in “hundreds of thousands of dollars” in consumer harm, highlighting the need for compliance and transparency in the fintech industry.
Financial Penalties Imposed
As a consequence of its findings, the CFPB has mandated that Wise pay:
- $450,000 in compensation for affected customers.
- $2.025 million as a civil money penalty.
The Bureau’s Director, Rohit Chopra, emphasized that by deceiving customers, Wise gained an unfair competitive edge in the remittance market. He stated, “New technology can help make money transfers cheaper and more convenient, but companies must be truthful and live up to longstanding law.”
Wise’s Response and Compliance Efforts
Wise operates in the U.S. through its subsidiary, Wise US, and has recently announced plans for expansion into Mexico. In response to the CFPB’s findings, a spokesperson for Wise stated:
“The CFPB conducted a routine examination from June 2020 to May 2021 regarding our compliance with U.S. financial laws.” Wise acknowledged that certain operational issues were identified, leading them to voluntarily compensate affected customers.
Wise has confirmed that it fully compensated customers for the total of $450,000 and collaborated with the CFPB to resolve the identified issues, with most concerns addressed by November 2022. The company emphasized its commitment to enhancing its compliance framework, stating:
“At Wise, we continuously invest in our compliance program and processes to ensure we maintain a robust framework, including in the U.S.”
Industry Implications
This incident with Wise is part of a larger trend where fintech companies face scrutiny and penalties for deceptive practices. Recently, Block, the parent company of Cash App, agreed to pay an $80 million fine related to violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations.
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