Hello Digit, a fintech company, used a faulty algorithm for automated savings transfers that caused overdraft fees for customers despite guaranteeing no overdrafts, prompting CFPB enforcement action and a $2.7 million fine.
Hello Digit, LLC is a San Francisco-based fintech company acquired by Oportun Financial Corporation in December 2021. The company offers a personal finance management app that uses a proprietary algorithm to make automatic transfers from consumers' checking accounts to savings accounts held in Hello Digit's name. Consumers pay a $5 monthly subscription fee for this service. The CFPB found that Hello Digit's algorithm routinely caused consumers' checking accounts to incur overdraft fees charged by their banks, despite the company's guarantee that its tool 'never transfers more than you can afford' and its 'no overdraft guarantee.' The company received complaints about overdrafts daily and has received nearly 70,000 overdraft-reimbursement requests since 2017. Hello Digit often denied customers who tried to recoup their overdraft fees, breaking promises to reimburse consumers for algorithm-caused overdrafts. Additionally, as of mid-2017, the company kept a significant portion of interest earned on consumer funds while representing that it would not keep any interest. The CFPB's enforcement action requires Hello Digit to pay redress to harmed customers and imposed a $2.7 million penalty.
Domain classification, causal taxonomy, severity scores, and national security assessments were LLM-classified and may contain errors.
AI systems that fail to perform reliably or effectively under varying conditions, exposing them to errors and failures that can have significant consequences, especially in critical applications or areas that require moral reasoning.
AI system
Due to a decision or action made by an AI system
Unintentional
Due to an unexpected outcome from pursuing a goal
Post-deployment
Occurring after the AI model has been trained and deployed