Consumer Protection: Fintech Complaints Have Been Rising

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Protocol | Ryan Deffenbaugh and Fintech team | Aug 29, 2022

Image: Unsplash/Gabriel Gonzalez

The CFPB received 20,900 complaints last year involving money transfer services (including mobile and digital wallets) and virtual currency companies, the category most closely associated with fintech. That marked a 63% increase from a year earlier, even if they amount to just a small part of the nearly 1 million complaints to the agency, the majority of which involve credit-reporting companies.

In response to complaints of fraud on peer-to-peer money-transfer services, the CFPB has promised new guidance "ensuring that financial institutions are living up to their investigation and error-resolution obligations," a CFPB spokesperson told the Wall Street Journal last month. That could include requiring refunds for fraudulent transfers, according to the Journal, which the industry warns could lead to higher costs or even encourage more fraud.

See: Some New Banking Rules Implemented to Protect Consumers in Canada

The guidance could address a common complaint flagged by the CFPB’s 2021 annual report. Customers trying to report issues such as fraudulent activity to money-transfer services "described no response to support tickets — and no way of contacting the company by phone.”
Some fintechs have promised to improve their responsiveness to customers. Both Coinbase and Robinhood added live phone support last fall. Block offers a phone line for Cash App and told Bloomberg in March that it is committed to “expanding our customer support and operations infrastructure.”

California is building its own mini CFPB

The state's Department of Financial Protection and Innovation is reviewing comments on a rule-making proposal that would dictate how some of the financial and fintech companies under its jurisdiction, such as lenders and debt collectors, respond to customer complaints.
While acknowledging the importance that companies respond to complaints, some within the industry have called out requirements such as quarterly reporting and responding to telephone-based complaints within 24 hours as particularly onerous, and beyond what is required by other regulators.

See: Penrose Report: Power to the People: Stronger Consumer Choice and Competition

Documents published about the rule noted that the DFPI was required to set new rules for companies to handle complaints and disputes as part of new authority granted under the 2020 California Consumer Financial Protection Law.

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