The hotly contested financial savings app Beam reached a preliminary settlement with the FTC
Beam – the mobile app that promised to pay up to 7% interest on insured savings to implode in a wave of customer complaints – is apparently on the verge of settling a lawsuit with the Federal Trade Commission that will start off “unfair or misleading acts. “
A lawsuit late Monday revealed the provisional settlement with Beam and its founder, Yinan “Aaron” Du.
The arrangement, which includes a standing injunction and monetary judgment, has yet to be approved by the FTC and a federal judge in San Francisco. No other terms are disclosed in the submission.
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An FTC spokesman declined to comment on the filing. A spokesman for Beam and you had no immediate comment.
Beam, which started in 2019, advertised itself as “the first mobile high-yield 99% bank account”. Customers could use the mobile app to deposit money and earn interest that was well above that of a conventional bank account, which, according to Beam, was possible due to the low overhead. Deposits would be fully insured by the FDIC and customers would have 24/7 access to their money.
However, a CNBC investigation in October found dozens of complaints from customers saying they couldn’t get their money – in some cases, for months. Customers said Beam blamed everything from its providers to the Covid-19 pandemic.
The CNBC investigation found that Beam used a complex but legal regime to route deposits back and forth across a network of banks. The banks paid Beam fees on these deposits, which Beam could then pass on to its customers in the form of above-market interest payments.
Under the agreement, customer deposits were actually FDIC insured if one of the banks failed. However, federal insurance did not cover a possible failure of Beam, which is not a bank.
After complaints surfaced online last year that customers were having trouble getting their money back, the vendors Beam processed these transactions with severed relationships with the company and confiscated operations.
Official eventually reached an agreement with vendors to temporarily resume processing transactions in order to return customer funds. On November 18, a Beam spokeswoman told CNBC that the company had “processed 98% of customer funds” and was working on fulfilling the remaining withdrawal requests.
However, that wasn’t good enough for the FTC, which that day filed a lawsuit in federal court in San Francisco to obtain a permanent injunction excluding Beam from future violations of the law.
“We want the court to tell Beam that it can’t make such false promises to customers again,” FTC deputy director Malini Mithal told CNBC.
In the latest filing, the parties are asking the court to postpone the lawsuit while FTC commissioners review the proposed “permanent injunction and monetary judgment”.
The filing states that the process will typically take “more than six weeks”.
A separate class action lawsuit is pending by a Florida depositor on behalf of thousands of Beam customers seeking damages and unpaid interest. A first conference in this case is planned for next week.
It’s unclear whether Beam is still in business and the spokesman had no immediate comment when asked. The company’s website is still up, but it now has a link to a blog post with instructions starting in November on how customers can claim cash. The website continues to promote Beam’s high yield savings accounts and promises “all growth”.
Additional reporting from Dawn Giel, Jennifer Schlesinger and Scott Zamost.