Beam users are getting money back, but savings app faces federal probe

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Customers of mobile savings app Beam, some of whom complained that they were unable to use their deposits for months, say they are finally getting their money back.

However, the troubles are far behind the San Francisco-based startup behind the app. The Federal Trade Commission is seeking a court order against alleged “deceptive acts” by Beam.

An investigation by CNBC in October found that Beam promised customers above-market interest rates and “24/7 access” to the Federal Insurance deposit. However, dozens of customers complained that their withdrawal requests were met with excuses. Now, even though the company is processing those customer requests, it faces several lawsuits, a federal investigation and an uncertain future.

Beam Financial, which collected some $ 2.4 million in deposits from an estimated 30,000 customers, said in a note to customers last week that it had processed withdrawal requests for “98% of all affected customers” as of last week , Of still unresolved requests with a value of only $ 17,000.

A company spokesperson wrote in an email that Beam is under “strict obligations” not to comment at this time.

“We have more to share, but it will come through a public statement at the appropriate time,” the spokesperson said. “Meanwhile, we are 100% focused on getting beam customers right.”

Among the customers who receive their funds is Steve Wolf, who since this summer was trying to use $ 15,000 in his account. Wolf, a marketing executive, lives in Oceanside, California.

In an interview he said, “Of course, one day I randomly had Rs 10,000 in my bank account.” “And then the next day there was another deposit of more than $ 5,000, which returned a small amount of money and interest that I charged.”

Steve Wolf opened an account with Beam in which separate money was kept for emergencies. “Now I have to spend hours fighting and getting it back,” he said.

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Other customers who reported problems earlier tell similar stories.

Tiffany Chang from Hanoi, Vietnam, said she received a deposit of $ 4,021.81 on 19 November. He said that his account represented a balance as well as some interest, but only two months before he submitted his withdrawal request. However, he is happy to put the matter in the past.

“I am relieved,” he wrote in an email to CNBC.

A federal case

So while the money is now being returned to customers, it is not over as the FTC is concerned.

The agency launched an investigation into Beam in May, and it filed a federal lawsuit on November 18, accusing the company and its 37-year-old CEO, Yinan “Aaron” Du, of “inappropriate or deceptive acts”. The agency said the lawsuit would continue despite the clients’ money being returned.

“We think it is important to go to court to make sure someone is holding the beam responsible,” Malini Mittal, Associate Director of the FTC’s Division of Financial Practices, said in an interview. “In addition to getting their money back to consumers, we are seeking an injunction against Beam that will prevent it from re-engaging in this type of malpractice.”

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Paul J. Richards | AFP | Getty Images

In addition to the FTC case, Beam faces a class action suit proposed by Florida depositor, Frederick Chang. The complaint was filed on November 10 in federal court in San Francisco by the Burlingam, California, law firm Cottchett, Pitre & McCarthy, LLP.

Chang’s lawyer, Brian Danitz, wrote in an email that his client initially deposited $ 15,000. He said that last week, Chang received the amount he had deposited seven weeks earlier, but without any interest that would have accrued since then. Danitz said the suit’s central allegations are unchanged.

“Beam promised ’24/7 access,’ no lock up ‘and said’ funds will arrive in three to five business days, ‘but deprived their customers of their hard-earned money for months.” “To make matters worse, many of Beam’s misleading promises are still on the web.

“A brick-and-mortar bank will not be allowed to do business in this manner.”

Chang is the only customer named in the complaint, but states that thousands of others are in the same situation. The complaint alleges Beam’s negligence, false advertising, concealment and breach of contract, and seeks unspecified damages.

Meanwhile, Beam’s three vendors are seeking a ruling from an Ohio court that they worked properly, as the company tried to blame some of its problems on third-party providers.

The sellers – financial services providers Davola and the Stable Custody Group, as well as Huntington National Bank, which had custody of Beam’s deposits – also asked the court to order Beam to cooperate in getting the depositors funds.

Beam’s spokesperson has previously declined to comment on the substance of the lawsuits, and the company is yet to respond in court.

Clearing a logjam

According to Beam’s note to customers, which appeared on its customer blog on 20 November, a stopgap agreement with those vendors may have helped clean up the backlog of withdrawal requests, though the letter does not say that some requests Only after taking action why are pending for months.

The note states that Dwaula – who has admitted that he terminated his relationship with Beam on 1 October. After 1 found out about customer complaints – agreed to temporarily reactivate their transaction processing gateway on 12 November, “finally allowing the release of funds for Huntington National Bank where the funds were placed back in Dvrola And it was returned to Beam’s customers from there. ”

Sellers declined to comment to CNBC for this story.

The note stated that Dowla would only agree to continue processing transactions until November 27, and urged customers to ensure that Beam had their current banking information.

“We’ve tried a lot, but were not able to negotiate anything now,” the note says.

While most customers were receiving their funds by electronic bank transfer, others are clearly being offered the option.

Beam aims to earn a higher interest rate on their money by engaging users with their mobile savings app.

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Jim Wilson, a customer who lives in Concord, California, said Beam offered him three options to get $ 5,000 back in early August – an Amazon gift card, a transfer via PayPal, or year-end. Check to be issued till. .

In an email to CNBC on November 23, Wilson wrote, “I chose the PayPal option. However, I have not received the money yet.”

Wilson requested the withdrawal of all the money from his account in late August. Not having access to the funds is a “huge pain”, he previously told CNBC, as he and his wife recently welcomed their first child.

For customers receiving the check, Beam warned them in a second blog post on November 21 to deposit or give cash within 180 days, “or they may no longer be good.”

Fintech under investigation

Beam is one of a growing number of so-called “fintech” companies – technology businesses that handle customer money but are not banks and are not regulated as financial institutions. The FTC says that it is devoting increasing resources towards continuing this new industry.

“We fully understand why these types of companies promise attractive benefits to consumers,” Mithal of the FTC said. “But we want to remind these companies that they have to make sure to follow certain basic consumer protection principles.

“It means keeping your promises, paying attention to your customers to make sure you’re keeping an eye on the early warning signs, and when you can’t keep the promises, things can go wrong instead of continuing, ” he explained. .

Meanwhile, Beam customer Wolf said he had learned his lesson about handing over money to an undisclosed financial app.

“It would be nice if there was a physical location or at least some kind of national brand – you know, a recognizable national bank that you’ve got some intercourse on if things go haste,” he said.

Additional reporting: Laurie Koneish, Don Gill, Jennifer Slessinger, Scott Zamost

Please email tips to investigations@cnbc.com.

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