FTC is suing financial savings app Beam Monetary on behalf of consumers

The Federal Trade Commission building in Washington DC

Ashley Stringer | CNBC

The Federal Trade Commission has filed a civil lawsuit for “unfair or misleading acts” by Beam Financial, a San Francisco start-up that is behind a savings app that claims to offer above-market interest rates on federally insured deposits.

As CNBC first reported in October, dozens of Beam customers complained that they could not access their funds for months.

The complaint, filed Wednesday in federal court in San Francisco, accuses Beam and its founder – 37-year-old Yinan “Aaron” Du – of misleading its customers by claiming they have “24/7” access on their funds with “no bridging.” Instead, the complaint states, customers who have tried to withdraw funds are given the bypass.

“With this in mind, many consumers have complained that defendants simply stole their deposits,” the complaint said. “Some consumers have pointed out that they have faced particularly serious trouble because defendants failed to return their money during an ongoing pandemic.”

In a statement, the FTC said Beam “misled users about how to access their funds.”

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“Beam Financial promised easy access to savings around the clock, but then people had to wait weeks or months to get their money,” said Andrew Smith, director of the FTC’s consumer protection bureau.

The complaint aims to provide unspecified relief for Beam’s customers as well as an injunction that excludes the company and you from further violations.

The complaint also states that Beam failed to keep its promise to pay high interest rates, including a base rate of 1%. According to the complaint, new customers are currently receiving an interest rate closer to 0.04%, similar to what they would receive on a traditional bank account. The complaint also alleges that Beam would stop paying interest on funds that customers tried to withdraw but would not return their money until weeks or months later.

A Beam spokeswoman declined to respond to the contents of the FTC complaint, but told CNBC in an email that the company was making progress to get people their money back.

“We have processed 98% of the customer funds affected,” said the statement.

Some customers, who previously complained that withdrawal requests went unheeded for months, told CNBC that their withdrawals were partially met on Wednesday.

San Diego director of marketing Steve Wolf, who tried to withdraw his entire $ 15,000 balance starting this summer, said he received a $ 10,000 deposit into his bank account. There was no word about the remaining $ 5,000.

Josh Allen of Colorado said his bank had notified him of an outstanding deposit of more than $ 7,800 from Beam.

In its complaint, the FTC said that returning funds often requires extreme measures on the part of customers.

“In many cases, consumers have received their money only after telling the defendants that they are reporting the problem to state regulators or law enforcement officials, or alternatively suggesting legal action,” the complaint said.

In addition to the FTC complaint, Florida depositor Frederick Chang filed a class action lawsuit last week on behalf of Beam’s customers. The company claims it has nearly 187,000 “subscribers,” though a source close to the company states that the number of actual accounts could be closer to 30,000.

Three of Beam’s vendors – the Huntington National Bank, which holds $ 2.4 million in Beam deposits, and transaction processing companies Dwolla and Stable Custody Group – have sued Beam in an Ohio court demanding that the company grant them provides the information required to return customer funds.

The Beam spokeswoman said the company was “working with Dwolla to resolve outstanding inquiries.”

The company has not yet responded to any of the lawsuits in court.

(With additional reports from Lorie Konish, Dawn Giel, Scott Zamost, and Jennifer Schlesinger.)

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