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Beam aimed to allow users to earn higher interest rates on their money by interacting with its mobile savings app.
CNBC
Beam – the mobile savings app that imploded last year after a CNBC investigation found dozens of customers were unable to withdraw their money – has been shut down as part of an agreement in principle with the Federal Trade Commission.
As part of the settlement, Beam is prohibited from operating any mobile banking application or any other product or service that may be used to deposit, store or withdraw funds. It is also prohibited to distort the interest rates, restrictions and other aspects of any financial product or service.
The company also has to repay approximately $ 2.6 million in customer deposits and interest.
The deal, which has yet to be approved by a federal judge in San Francisco, prohibits the company’s founder, Yinan “Aaron” Du, from operating a similar business in the future. Under the regulations, neither Beam nor Du admit to wrongdoing.
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“The message here is simple for mobile banking apps and similar services: don’t lie about your customers’ ability to get their money when they need it,” said Daniel Kaufman, acting director of consumer protection at the FTC, in a statement.
A spokeswoman for Beam and Du did not immediately respond to a request for comment.
Beam, which launched in 2019, touted itself as “the first high interest mobile savings account for the 99%”.
The company claimed that its lean business model, running exclusively through an app without physical branches, allowed it to pay customers much higher deposit interest than a traditional bank, with “24/7 access” to their money. .
Beam was supposed to pay between 0.2% and 1%, which is about 20 times the usual bank rate for account holders. Users could increase their daily rate up to 7% by performing tasks such as referring new customers. Beam said customer deposits were insured by the FDIC, although, as the company acknowledged, Beam itself was not a bank.
Last fall’s CNBC investigation found that Beam used a legal arrangement known as a sweep account to transfer clients’ deposits through a network of banks, collecting interest on those funds which he could then repay. to depositors. Because Beam was not a bank, FDIC insurance would cover customers if one of the banks went bankrupt, but not if Beam itself went bankrupt.
Customers said they started having problems last spring. The withdrawal requests have not been heeded, users said, and the complaints have apparently been met with apologies blaming everything from Beam’s suppliers to the Covid-19 pandemic. In November, the FTC sued Beam alleging “unfair or deceptive acts”.
Ten days later, the company told CNBC it had processed withdrawals “for 98% of all requested clients” and was working to complete the rest. Several clients have confirmed to CNBC that they have finally received their funds. It was not clear from the court filings how much money, if any, remained unpaid.
A class action lawsuit proposed by a Florida filer accusing Beam of fraud and negligence and seeking unspecified damages is still pending.
Beam has yet to respond to the complaint. A conference before an American magistrate is scheduled for next month.
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