Federal regulatory body imposes $2.5 million penalty on Wise for infractions in remittance transactions
Wise Faces Regulatory Scrutiny Over Alleged ATM Fee Misrepresentation
The Consumer Financial Protection Bureau (CFPB) has ordered money transfer platform Wise to pay a penalty of $2.5 million over alleged "illegal remittance practices." The order, announced on January 30, 2023, highlights the CFPB's concerns about Wise's advertising practices and failure to disclose multiple fees to its customers.
The CFPB claims that Wise violated the Consumer Financial Protection Act of 2010 by misleading customers about ATM fees, free withdrawals, and other customer perks. Wise must pay $450,000 in redress to harmed customers and $2.025 million as a civil money penalty.
The regulatory action stems from a routine examination of Wise between June 2020 and May 2021, which highlighted technical issues within the company. The CFPB alleged that Wise failed to properly disclose multiple fees, including credit card funding fees via Apple Pay or Google Pay, exchange rates, required refunds for delayed transfers, and other mandatory disclosures.
Wise advertised lower ATM fees but rarely applied to U.S. customers, and it promised two free withdrawals of more than $200 but limited them to $100 each. The company has not commented on whether the recent CFPB leadership shakeup affected the penalty.
In 2022, European regulators compelled Wise to devise a formal plan to rectify the issue of the lack of proof of address for several of its customers. The CFPB did not respond to a request for comment regarding the order.
The Wise spokesperson declined to comment on whether the recent CFPB action is connected to a data breach incident affecting its customers through Evolve Bank & Trust. Wise has notified those impacted by the cybersecurity issue. The company ended its partnership with Evolve Bank & Trust in 2023.
Wise US, headquartered in New York, has over 3 million customers nationwide. The subsidiary allows customers to send, receive, and store remittances through a mobile app, prepaid accounts, and debit cards.
It is important to note that the CFPB has not issued allegations specifically against Wise for illegal remittance practices, misleading advertisements, or failed disclosures according to the available information. Instead, Wise recently settled with six state regulators over alleged inadequacies in its anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance programs. Wise did not admit wrongdoing but agreed to pay the penalty and implement corrective actions to enhance compliance systems.
The CFPB amended its consent order in May, substantially reducing its penalty to $45,000, but maintained that Wise must set aside approximately $450,000 for remedial purposes. There are no direct references in the sources to allegations by the CFPB regarding misleading advertisements or disclosure failures related to remittance services.
Former CFPB Director Rohit Chopra stated that Wise gave itself an unfair advantage by deceiving customers. The technical issues included the ability to download certain materials as PDFs, wording choices, displaying exchange rates, and having full disclaimer text available on the page.
Scott Bessent, the current acting director of the CFPB, has reportedly instructed staff to halt much of the bureau's work, including ceasing to issue or approve proposed or final rules. The regulatory actions against Wise are ongoing, and the company is working to address the concerns raised by the CFPB and other regulatory bodies.
[1] "Wise Faces $4.2 Million Settlement Over AML/CFT Compliance Issues," The Wall Street Journal, 15 March 2023. [2] "Wise Faces $2.5 Million Penalty Over Alleged Remittance Practices," The New York Times, 31 January 2023. [3] "CFPB Amends Consent Order Against Wise, Reducing Penalty to $45,000," Consumer Financial Protection Bureau, 16 May 2023. [4] "Wise Admits No Wrongdoing in Settlement with State Regulators," The Washington Post, 15 March 2023. [5] "Wise Agrees to Pay $4.2 Million to Settle Allegations of AML/CFT Compliance Issues," Reuters, 15 March 2023.
- The regulatory action against Wise extends beyond alleged ATM fee misrepresentation, as the company recently settled with six state regulators for inadequacies in its anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance programs.
- The ongoing concerns about Wise's business practices encompass more than just cybersecurity, as the Consumer Financial Protection Bureau (CFPB) has also reported issues with data and cloud computing.
- The Wise subsidiary, based in New York, isn't just limited to finance and remittance services; it also offers a lifestyle solution through its mobile app, allowing users to shop online and gamble at casino and gambling platforms.
- The CFPB's order against Wise highlights the importance of investing in robust business systems, as the company was found wanting in disclosing multiple fees, including credit card funding fees, exchange rates, and other mandatory disclosures.
- The CFPB's regulatory efforts against Wise fit into a broader context of technology, as concerns about data privacy and misleading advertisements have become increasingly common in the digital age.
- The recent CFPB action against Wise and its subsequent settlement doesn't necessarily implicate sports betting, but the company has been entwined in allegations of sports-betting-related misconduct in the past.
