On August 21, the CFPB filed an adversary proceeding complaint with the U.S. Bankruptcy Court for the Central District of California against a debtor fintech company, along with a proposed stipulated final judgment and order, which would permanently prohibit the fintech from operating or participating in numerous financial activities, including deposit taking activities, money transmission, custodial activities, and payment and financial data processing. The fintech’s Chapter 11 Trustee filed a corresponding motion to approve the settlement. In the complaint, the Bureau alleged that the company engaged in unfair acts and practices when it failed to keep accurate records of consumers’ funds held in omnibus accounts for the benefit of consumers. According to the complaint, beginning in mid-2023, the fintech engaged with partner banks to offer users a cash management program, and was responsible for tracking the location of individual customer funds across the network, and for providing the partner banks with access to the data and records relating to customer activity. As early as September 2023, the fintech’s records significantly overstated the amount of funds actually maintained by the partner banks, resulting in a shortfall of tens of millions of dollars. After the fintech’s operations ceased in May 2024, the partner banks stopped processing transactions and instituted freezes on customer account activity, and thousands of consumers were unable to access their funds for weeks or months.

In addition to injunctive relief prohibiting the fintech from operating, the settlement imposed a civil money penalty of one dollar on the company.

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