CFPB sues Walmart and Branch Messenger for unlawfully establishing deposit accounts for over one million delivery drivers.
The Consumer Financial Protection Bureau (CFPB) has initiated legal action against Walmart and Branch Messenger, accusing them of compelling delivery drivers to utilize expensive deposit accounts for payment and misleading workers—specifically, the "last mile" drivers within Walmart’s Spark Driver program—regarding the accessibility of their earnings.
The lawsuit claims that Walmart and Branch established Branch accounts for Spark Drivers, subsequently depositing the drivers' wages into these accounts without obtaining their consent. Walmart allegedly informed Spark Drivers that using Branch was mandatory for payment and threatened termination for those who opted out of these accounts.
Furthermore, both Walmart and Branch are accused of providing false information about the possibility of accessing earnings on the same day. Drivers encountered a complicated procedure to retrieve their funds, and upon doing so, they faced additional delays or fees when attempting to transfer their earnings to a preferred account. This situation led to workers incurring over $10 million in fees for transferring their earnings.
“Walmart made false promises, illegally opened accounts, and took advantage of more than a million delivery drivers,” stated CFPB Director Rohit Chopra. “Companies cannot force workers into getting paid through accounts that drain their earnings with junk fees.” Walmart (NYSE: WMT), a multinational retail corporation based in Bentonville, Arkansas, runs the Spark Driver Program, which enables gig economy drivers to perform "last-mile" deliveries from Walmart locations across the country. Branch is a financial technology firm that provides a deposit account through Evolve Bank & Trust, accessible to consumers via a digital application and debit card.
Additionally, the CFPB alleges that Branch participated in various unlawful practices concerning consumer accounts, including neglecting to investigate reported errors, failing to comply with stop payment requests, not maintaining essential records, not providing required disclosures, and unlawfully compelling consumers to waive their rights.
The Consumer Financial Protection Bureau (CFPB) asserts that Walmart and Branch engaged in violations of federal law over a period of approximately two years beginning in 2021 by: Unlawfully establishing accounts for drivers to receive their payments while eliminating their choice in payment methods: Walmart and Branch created accounts for new drivers using their personal information, including Social Security numbers, without securing the drivers' consent.
Consequently, drivers' earnings were deposited into these accounts without their authorization. Access to their earnings was contingent upon drivers agreeing to the terms and conditions set by Branch. Walmart mandated that Spark Drivers utilize Branch accounts or risk termination.
Collecting over ten million dollars in excessive fees from drivers: Spark Drivers incurred more than ten million dollars in unnecessary fees to Branch for the immediate transfer of their earnings to a preferred account. Misleading drivers regarding their access to earnings: Walmart and Branch falsely informed drivers that Branch Accounts would provide them with "instant access" to their payments.
In reality, numerous drivers faced delays in accessing their wages or incurred fees to transfer their funds elsewhere. Additionally, Branch misled drivers about their ability to halt payments or execute specific transfers using these accounts. Enforcement Action Pursuant to the Consumer Financial Protection Act, the CFPB possesses the authority to take action against entities that violate consumer financial protection laws, including the Truth in Savings Act (TISA), the Electronic Fund Transfer Act (EFTA), and the prohibitions against unfair, deceptive, or abusive acts or practices as outlined in the Consumer Financial Protection Act (CFPA). The CFPB's lawsuit aims to halt the unlawful practices of these companies, provide restitution to affected consumers, and impose a civil monetary penalty, which would be allocated to the CFPB's victims relief fund.
The recent enforcement action is a continuation of the Consumer Financial Protection Bureau's (CFPB) efforts to enhance consumer protections within the workplace. In October, the CFPB released guidance underscoring the obligation of companies utilizing third-party consumer reports, such as background checks and algorithmic scoring based on surveillance, to adhere to the Fair Credit Reporting Act (FCRA) regulations.
The CFPB has drawn attention to the increasing incidence of employer-induced debt and the difficulties consumers encounter when they incur debts to their employers as a prerequisite for employment. This marks the CFPB's inaugural action against a fintech partner of Evolve Bank & Trust concerning a deposit product. Previously, the CFPB initiated legal proceedings against SoLo Funds, another fintech partner of Evolve Bank & Trust, in the realm of short-term, small-dollar loans. In June, the Federal Reserve Board took enforcement action against Evolve, determining that the bank had inadequately monitored its fintech partners.
Consumers are encouraged to file complaints regarding financial products and services by visiting the CFPB's website or by calling (855) 411-CFPB (2372). Employees who suspect that their employer has breached federal consumer financial protection laws are urged to report their findings to whistleblower@cfpb.gov. For further information on how to report potential misconduct within the industry, please visit the CFPB's website.
The CFPB's lawsuit against Walmart and Branch highlights significant issues regarding worker exploitation and unfair financial practices in the gig economy. By unlawfully creating accounts and imposing excessive fees, the companies have drawn regulatory scrutiny, underscoring the need for stronger consumer protections in digital payment systems for workers.
