Beam clients get a reimbursement, however the financial savings app remains to be pending federal investigations
Beam mobile savings app customers, some of whom complained about not having access to their deposits for months, say they are finally getting their money back.
The problems for the San Francisco-based startup behind the app are far from over, however. The Federal Trade Commission is seeking a court order against alleged “fraudulent activity” by Beam.
A CNBC investigation in October found that Beam was promising customers above-the-market interest rates on government-insured deposits and "24-hour access" to their funds. However, dozens of customers complained that their redemption requests were answered with a variety of excuses. Now as the company handles these customer inquiries, it faces multiple lawsuits, a federal investigation, and an uncertain future.
Beam Financial, which has collected approximately $ 2.4 million in deposits from an estimated 30,000 customers, announced last week that it had withdrawal requests for "98% of all affected customers" with a value of only last week Got about $ 17,000 processed from inquiries still unresolved.
A company spokesperson wrote in an email that Beam has "strict obligations" not to comment at this time.
"We have more to share, but it will come through a public statement in due course," the spokesman said. "In the meantime, we're 100% focused on getting Beam customers right."
Among the customers who received their money is Steve Wolf who has been trying to access the $ 15,000 in his account since this summer. Wolf, a marketing director, lives in Oceanside, California.
"Sure enough, one day there happened to be $ 10,000 in my bank account," he said in an interview. "And then there was another deposit of just over $ 5,000 the next day that gave me the money I invested and a little bit of interest."
Steve Wolf opened an account with Beam to hold funds for emergencies. "Now I have to fight and spend hours to get it back," he said.
Other customers who have previously reported problems share similar stories.
Tiffany Chang of Hanoi, Vietnam said she received a deposit of $ 4,021.81 on Nov. 19. She said this was her account balance plus some interest, but only until she submitted her withdrawal request two months ago. Still, she is happy to put the matter in the past.
"I'm relieved it's over," she wrote in an email to CNBC.
A federal case
While money is now being returned to customers, it's not over for the FTC.
The agency began investigating Beam in May and filed a federal lawsuit on November 18 accusing the company and its 37-year-old CEO, Yinan "Aaron" Du, of "unfair or misleading acts." The agency said the lawsuit would continue despite customers getting their money back.
"We think it's important to go to court to make sure someone holds Beam accountable," Malini Mithal, deputy director of the FTC's financial practices department, said in an interview. "In addition to getting consumers their money back, we're looking for an order against Beam that will prohibit them from engaging in this type of wrongdoing ever again."
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In addition to the FTC case, Beam is facing a proposed class action lawsuit by Florida depositor Frederick Chang. The complaint was filed on November 10th in federal court in San Francisco of Burlingame, California, under the law firm Cotchett, Pitre & McCarthy, LLP.
Chang's attorney Brian Danitz wrote in an email that his client originally deposited $ 15,000. He said last week Chang received the amount he had deposited seven weeks ago, but excluding the interest that has been accrued since then. Danitz said the main allegations of the lawsuit remained unchanged.
"Beam promised '24/7 access', 'no locks' and 'funds will arrive in three to five business days' but robbed its customers of theirs for months hard earned money, "he said. "To make matters worse, many of Beam's misleading promises are still available online.
"A stationary bank would never be allowed to do business that way."
Chang is the only customer named in the complaint, but it is said that thousands of others are in the same situation. The complaint accuses Beam of negligence, false advertising, deception through concealment and breach of contract, and asks for unspecified damages.
Meanwhile, three Beam vendors are demanding a ruling from an Ohio court that they acted properly after the company tried to blame third-party vendors for some of its problems.
The vendors – financial services firms Dwolla and Stable Custody Group, plus Huntington National Bank, which held Beam's deposits – asked the court to instruct Beam to work together on returning the funds to depositors.
Beam's spokesman has previously refused to comment on the content of the lawsuit and the company has not yet responded in court.
Clear traffic jams
According to Beam's notice to customers posted on its customer blog on Nov. 20, a workaround with these vendors may have helped clear the backlog on withdrawal requests, although the letter does not state why some are now taking action Requests being executed have been pending for months.
The notice said that Dwolla – who confirmed it ended its relationship with Beam on October 1 after learning of customer complaints – agreed to temporarily re-enable its transaction processing gateway on November 12 , "So that the funds can be finally released by Huntington National." Bank where the funds were returned to Dwolla and from there returned to Beam customers. "
The providers declined to comment on CNBC's story.
The announcement said Dwolla would only agree to continue processing transactions until Nov. 27 today, and urged customers to ensure that Beam has their current banking information.
"We tried very hard, but we couldn't negotiate any longer," the note said.
While most customers received their money via electronic transfer, others appear to be offered alternatives.
Beam wanted users to be able to earn higher interest rates on their money with the savings mobile app.
Jim Wilson, a customer who lives in Concord, Calif., Said Beam offered him three options to get back the $ 5,000 he invested in early August – an Amazon gift card, a wire transfer via PayPal, or a check that should be issued by the end of the year.
"I chose the PayPal option, but I haven't received the money yet," Wilson wrote in an email on November 23 on CNBC.
Wilson asked for all the money to be withdrawn from his account in late August. Not having access to the funds was a "huge pain," he previously told CNBC when he and his wife recently welcomed their first child.
For customers who receive checks, Beam warned them in a second blog post on Nov. 21 to deposit or cash them within 180 days, "or they may be no longer good."
Fintech under the microscope
Beam is one of a growing number of so-called "fintech" companies – technology companies that manage customer funds but are not banks and are not regulated as financial institutions. The FTC says it is increasingly devoting resources to overseeing this new industry.
"We absolutely understand why these types of companies make attractive benefits to consumers," said Mithal of FTC. "However, we would like to remind these companies that they must adhere to certain basic principles of consumer protection.
“That means keeping your promises, paying attention to your customers to make sure you are keeping an eye on the early warning signs, and making changes if things go wrong instead of continuing to make promises you can't keep,” he said .
Meanwhile, Beam customer Wolf said he had learned his lesson on how to entrust money to an unfamiliar finance app.
"It would be nice if there was a physical location, or at least some kind of national brand – you know, a recognizable national bank to fall back on when things get mixed up," he said.
Additional coverage: Lorie Konish, Dawn Giel, Jennifer Schlesinger, Scott Zamost