CFPB Slaps Wise with $2.5 Million Penalty for Deceptive Remittance Practices.
In a landmark ruling, the Consumer Financial Protection Bureau (CFPB) has ordered the international remittance company, Wise, to pay a hefty fine of $2.5 million after discovering a series of illegal actions, including deceptive advertising, misleading fees, and failure to properly disclose crucial costs to consumers.
Wise, which allows customers to send, receive, and store international remittances via a mobile app and prepaid accounts, was found to have misled U.S. customers regarding ATM fees and failed to provide accurate information on exchange rates and other charges. In addition, the company failed to refund fees when transfers were delayed, resulting in significant financial harm to its customers.
According to the CFPB, Wise’s actions impacted hundreds of thousands of dollars in consumer funds. The company has been directed to pay approximately $450,000 in redress to those affected by its actions. Additionally, the company will face a $2.025 million civil penalty.
“By deceiving customers, Wise gave itself an unfair advantage over other competitors in the remittance market,” said CFPB Director Rohit Chopra. “New technology can help make money transfers cheaper and more convenient, but companies must be truthful and live up to longstanding law.”
Wise’s Operations in the U.S.
Wise PLC (LON: WISE), headquartered in the United Kingdom, operates in the United States through Wise US, a wholly-owned subsidiary. With over three million U.S. customers, Wise US provides international money transfer services in 48 states, the District of Columbia, Guam, the U.S. Virgin Islands, and Puerto Rico.
Wise does not operate any physical storefronts in the U.S.; instead, it relies on its mobile app, prepaid accounts, and debit cards to process transfers. The company’s U.S. operations include two main products: Send Money (remittance transfers via the mobile app) and the Wise Account (a prepaid account product). These allow customers to store and transfer money in multiple currencies and spend funds using a linked debit card.
Violations and Deceptive Practices
The CFPB found that Wise violated several laws, including the Consumer Financial Protection Act of 2010 and the Electronic Fund Transfer Act. Specifically, the company misled customers with false advertisements, failed to disclose fees correctly, and neglected to refund fees when transfers were delayed.
Some of the deceptive practices identified by the CFPB include:
- False Advertisements: Wise sent promotional emails and blog posts advertising lower ATM fees and free withdrawals, misrepresenting these offers to U.S.-based customers. The company claimed that 80% of users would benefit from lower ATM fees, but this claim was not true for U.S. customers. Moreover, U.S. customers were led to believe they were entitled to two free withdrawals of slightly over $200, but in reality, they received only two free withdrawals of up to $100 each.
- Failure to Disclose Fees: The company failed to disclose accurate fees when consumers funded prepaid accounts via Apple Pay or Google Pay. Additionally, Wise did not adequately disclose exchange rates and did not refund fees when funds were not delivered on time, as required by law.
Enforcement and Penalties
The CFPB’s order mandates Wise to:
- Pay approximately $450,000 in consumer redress: Wise’s violations led to significant financial losses for U.S. consumers. For example, over 16,000 consumers were overcharged due to the company’s prepaid card mismanagement.
- Pay a $2.025 million civil penalty: The company is also required to pay a fine to the CFPB’s victims relief fund, further addressing the harm caused by its deceptive practices.
The CFPB emphasized that financial institutions must abide by consumer protection laws and uphold transparency in their advertising, fees, and financial disclosures. The penalties against Wise underscore the importance of holding companies accountable for unfair and deceptive practices in the financial services industry.
The action against Wise marks another significant enforcement effort by the CFPB as it works to protect consumers from deceptive financial practices in an increasingly digital world.