An Open Letter to CFPB Director Rohit Chopra

We need to protect consumers from the deceptive practices of fintech companies that falsely mislead consumers about FDIC-insured products.

Dear Director Chopra,

I am writing to ask for your intervention in a rapidly escalating crisis within the fintech industry that has left thousands of consumers, including myself, financially devastated and desperate for relief. Neobanks Yotta, Juno, and Copper, in partnership with the bankrupt payment processor Synapse and the FDIC-insured bank Evolve, have misled consumers into believing their deposits were fully FDIC-insured when, in fact, they were not FDIC-insured at all.

Consumers deposited their hard-earned money with these neobanks under the impression that their funds were protected by FDIC insurance. These consumers self-reported their stories on Reddit, Forbes, and reporter Jason Mikula. However, as the situation has deteriorated, with Synapse filing for bankruptcy and Evolve freezing accounts, it became clear in the court hearing on May 17, 2024, that the FDIC disclaims responsibility because the funds are held by a payment processor, not directly by an insured bank.

This multi-layered problem has left consumers confused and financially vulnerable. Evolve, the only FDIC-insured entity involved, appears to have merely lent its routing number to the neobanks, enabling them to mislead consumers about the safety of their deposits. Despite Evolve's limited role in handling customer money, all the neobanks involved (Yotta, Juno, and Copper) clearly and convincingly inform consumers that their funds are fully insured. By way of example, when Yotta moved away from Evolve in October 2023, it informed users that the move was made for "more partner redundancy and increased FDIC insurance coverage."

The change that Yotta described did not increase the FDIC insurance coverage; instead, the neobanks effectively eliminated insurance coverage for these accounts when they moved to a brokerage model. Thousands of consumers, including my college-aged daughter and me, relied on services like this for daily financial needs and have now lost access to our money due to this deception. Please read the reports these consumers are making online.

While the FDIC maintains it can do nothing in this case, it has previously intervened in non-traditional financial crises, such as the temporary liquidity guarantee program for money market mutual funds during the 2008 financial crisis, the debt guarantee program for bank holding companies and certain savings and loan holding companies in 2008-2009, and the backstop for Silicon Valley Bank's uninsured depositors in 2023. The FDIC's inaction leaves the CFPB uniquely positioned to protect consumers.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5491), the CFPB has the authority to regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. Additionally, the Consumer Financial Protection Act (12 U.S.C. § 5531) prohibits unfair, deceptive, or abusive acts or practices (UDAAP) in connection with any transaction with a consumer for a consumer financial product or service.

The FDIC is unwilling to look beyond its charter's technicalities and exercise its discretion in the public interest to protect consumers, as it has done in past crises. If the FDIC holds to its position, then the CFPB should investigate the neobanks and payment processors for engaging in unfair, deceptive, or abusive practices by falsely claiming FDIC insurance on consumer deposits and to investigate Evolve for its role in lending its trademark and its claim of FDIC insurance to fintechs that are not covered.

Failure to act decisively in this matter will only erode public trust in our financial system, leaving countless Americans vulnerable to similar deceptive practices. The CFPB and FDIC must work together to prioritize consumer protection over narrow interpretations of institutional mandates.

Along with countless other affected consumers, I hope the CFPB will use its statutory authority to investigate this situation thoroughly and take appropriate action to protect consumers and restore confidence in the integrity of our financial institutions. Thank you for your attention to this critical matter.