The idea seemed easy enough: form a banking institution based on an app (Beam). There were no brick-and-mortar locations, no bank tellers or anything traditional. In turn, depositors would be rewarded with above-market interest rates, 24/7 access and, let’s face it, a “we’re cool” banking proposition. The funds are, of course, federally insured.
The San Francisco-based bank was democratic in accepting money from just about anyone. In fact, about 30,000 customers had deposited $2.4 million.
But Where’s My Money?
With all of this grand hurrah, there is an inconvenient problem: it has been difficult, if impossible for dozens of bank depositors to get their money. The problem is so significant that the Federal Trade Commission is about to go to court against Beam for “deceptive acts,” and even though the company is being forced to process the customer demands for their money, it is facing multiple class action lawsuits.
As of this writing, Beam (in a note) claims “that it had processed withdrawal requests for 98% of all affected customers.” About $17,000 is still owed to customers. Other than the note, calls to Beam are met unanswered save for this troubling response to reporter questions:
“We have more to share, but it will come through a public statement at the appropriate time. Meanwhile, we are 100% focused on making Beam customers right.”
Ethically, there is an underlying problem that the founders of Beam don’t – or can’t seem to address. There is an obvious lack of liquidity in their system. Obviously, while the institution is not large by banking standards, the concept is showing signs of early failure. It is acceptable when a failure occurs in a bowling alley or sushi restaurant but a bank is an entirely different thing.
Oddly enough, when customers are finally able to claim their funds, deposits into their accounts are happening piecemeal and interest calculations show that they are not getting what they fully should be getting.
The Lawsuits
While money is now being returned to customers, albeit in painstakingly slow fashion, it is not over as far as the FTC is concerned. The company is being accused of “unfair or deceptive acts.”
According to Malini Mithal, associate director of the FTC’s Division of Financial Practices:
“We think it’s important to go to court to make sure that someone is holding Beam accountable. In addition to consumers getting their money back, we are seeking an order against Beam that would prohibit it from ever engaging in this type of misconduct again.”
I should point out, that in addition to FTC regulators breathing down their necks, several class action lawsuits are in play. In one case, an individual deposited $15,000 with the online app, but after nearly two months of wrangling for the money, it was eventually returned but without interest.
In another situation, a depositor placed $5,000 with Beam and wanted to withdraw it in August 2020. He was stalled and eventually the online bank gave him a “Let’s Make a Deal” option. They would give him — an Amazon gift card, a transfer via PayPal or a check to be issued by the end of the year! Though he chose the most logical route, the PayPal route (that would still mean he would lose a percentage his funds), as of January 2021, he has yet to receive his money.
Beware “Financial Technology”
Beam is one of those “fintech” entities which represent, in my opinion, a dangerously gray banking area. Fintech companies have gained a strange – and frightening – foothold. They hold and handle retail customer funds, but they are not regulated as banks.
The FinTech’s worry the hell out of the FTC, and they should. While having an app on a mobile device that instantaneously allows us 24/7 to our money – or to deposit money with the promise of higher interest, might seem attractive, but who protects the customer?
“We absolutely understand why these kinds of companies promise attractive benefits to consumers,” FTC’s Mithal said. “But we want to remind these companies that they have to make sure to observe certain baseline consumer protection principles.”
Those principles, my friends, are called ethics. Unless the Fintech companies such as Beam legally adhere to the same ethical constraints as more traditional brick and mortar banks, unethical players have the potential opportunity to commit scams. Beam can rationalize away their advantages, but unless they deliver on their promises, hi-tech or not, they are fraudsters all the same.
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