In a significant regulatory action, the Consumer Financial Protection Bureau (CFPB) has fined Wise, a London-listed fintech company, nearly $2.5 million for misleading advertising related to its fees. The penalty comprises a $2 million civil fine and $450,000 in customer compensation. The CFPB’s investigation revealed that Wise inaccurately advertised ATM fees, failed to properly disclose exchange rates, and did not refund remittance fees within the legally required timeframe when payments were delayed. These actions were deemed to have given Wise an unfair advantage in the remittance market.
Background on Wise and CFPB
Wise, formerly known as TransferWise, is a prominent fintech company specializing in international money transfers and cross-border payments. Founded in 2011, the company has grown rapidly, offering services that allow customers to send, receive, and store money across borders through a mobile app and associated debit cards. Wise is known for its transparent fee structure and real exchange rates, positioning itself as a cost-effective alternative to traditional banks.
The Consumer Financial Protection Bureau (CFPB) is a U.S. government agency responsible for overseeing financial institutions and enforcing consumer protection laws. Established in 2011, the CFPB’s mission is to ensure that consumers are treated fairly by banks, lenders, and other financial entities. The bureau has the authority to take enforcement actions against companies that violate consumer protection laws, including imposing fines and mandating corrective measures.
This recent fine is not Wise’s first encounter with regulatory challenges. In 2022, the company was fined $360,000 by the United Arab Emirates’ financial regulator for anti-money laundering (AML) failings, including inadequate due diligence for high-risk customers. Additionally, in October 2024, Wise’s CEO, Kristo Käärmann, was fined £350,000 by the UK’s Financial Conduct Authority (FCA) for failing to notify the regulator about a tax fine from HM Revenue and Customs.
Details of the CFPB Fine
The CFPB’s investigation into Wise uncovered several violations related to the company’s remittance practices:
- Misleading ATM Fee Advertisements: Wise promoted lower ATM fees and free withdrawals in various communications, leading U.S. customers to believe these perks applied to them when they did not.
- Failure to Disclose Exchange Rates and Other Fees: The company did not properly inform customers about the exchange rates and additional costs associated with their transactions, which is a requirement under U.S. law.
- Delayed Refunds of Remittance Fees: When funds were not available to recipients by the promised date, Wise failed to refund remittance fees within the legally mandated timeframe, causing financial harm to consumers.
As a result of these violations, the CFPB has ordered Wise to pay approximately $450,000 in redress to affected consumers and a $2.025 million civil money penalty. The bureau emphasized that by deceiving customers, Wise gained an unfair advantage over competitors in the remittance market.
Wise’s Response
In reaction to the Consumer Financial Protection Bureau’s (CFPB) findings, Wise acknowledged the issues and compensated affected customers, attributing the discrepancies primarily to technical problems. The company stated that it “strongly disagrees” with the CFPB’s characterization of its conduct but cooperated with the bureau to resolve the matter.
Industry and Consumer Impact
This enforcement action against Wise underscores the increasing regulatory scrutiny faced by fintech companies, particularly in the remittance sector. The CFPB’s intervention highlights the necessity for fintech firms to maintain transparent and accurate communication regarding fees and services.
For consumers, this development serves as a reminder to remain vigilant about the terms and conditions of financial services they utilize. It emphasizes the importance of understanding fee structures and exchange rates when engaging in international transactions.
The broader fintech industry may experience heightened regulatory oversight as a result of this case. Companies operating in this space should anticipate stricter enforcement of consumer protection laws and may need to reassess their compliance frameworks to avoid similar penalties.
Conclusion
The CFPB’s $2.5 million fine against Wise for misleading fee advertising marks a significant moment in the regulation of fintech companies. It underscores the critical importance of transparency and compliance in financial services, both for consumer protection and for maintaining fair competition within the industry. As fintech continues to evolve, companies must prioritize clear communication and adhere strictly to regulatory standards to foster trust and ensure sustainable growth.
