Digital bank Chime near settlement with customers affected by service outage
Digital bank Chime Financial has secured Court approval of a proposed settlement with customers who sued the company over services outage that occurred back in October 2019.
On October 28, 2020, the California Northern District Court granted a motion for preliminary approval of class action settlement filed by Plaintiffs Ryan Richards, Ruba Ayoub, Brandy Terbay, and Tracy Cummings.
The plaintiffs filed this putative class action against Chime Financial, Inc., The Bancorp Inc., and Galileo Financial Technologies, LLC based on a disruption in Chime’s online-only banking services. The plaintiffs allege that on October 16, 2019, Chime had a system-wide service outage that lasted approximately 72 hours.
During this service disruption, Chime’s customers, approximately 5 million people, could not access their accounts. During this time, customers could not access their funds, including through card purchases and ATM withdrawals. Following the service disruption, some customers reported incorrect account balances and unauthorized charges.
Plaintiffs bring this action on behalf of a putative nationwide class of Chime customers who were denied access to their accounts beginning on October 16, 2019, as well as subclasses of customers denied access to their accounts who reside in Florida, Texas, Illinois, and Georgia.
The plaintiffs allege causes of action for negligence; unjust enrichment; breach of contract; conversion; breach of fiduciary duty; violation of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201; violation of the Illinois Consumer Fraud Act, 815 Ill. Comp. Stat. §§ 505/1 et seq.; and violation of the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. §§ 510/2 et seq.
Pursuant to the settlement agreement, the defendants have agreed to compensate settlement class members who submit verified claims under a two-tier system:
- Tier 1: Class members who claim they suffered loss due to the outage, but who do not have or do not wish to provide documentation to substantiate their loss will be entitled to up to $25 for verified claims. Defendants’ aggregate payment under Tier 1 is $4 million.
- Tier 2: Class members who claim they suffered loss due to the outage and have “reasonable documentation” to substantiate their loss will be entitled to up to $750, but not more than their verified loss. Those who fail to provide documentation will be considered under Tier 1. Defendants’ aggregate payment under Tier 2 is $1.5 million, plus any residual money unclaimed under Tier 1.
In this case, putative class members already received $5,960,563 from the defendants, including a $10 courtesy payment received by all class members and transaction credits to cover certain fees that some Chime account holders incurred during the service disruption.
Still, the Settlement Agreement provides a means for putative class members to receive compensation for losses without the burden of providing documentation to support their damages. They may recoup up to $25 without documentation and up to $750 if they provide documentation. Under this process, the defendants have agreed to pay up to $5.5 million to putative class members for any verified damages suffered during the 72-hour Service Disruption.
Having weighed the relevant factors, the Court preliminarily found that the settlement agreement is fair, reasonable, and adequate, and granted preliminary approval.