San Francisco-based FinTech app ‘Beam’ promised clients above-market rates on federally insured deposits with 24/7 access to their funds, but did not return their deposits when requested, as noted in a new federal lawsuit filed by the Federal Trade Commission (FTC). The banking app is now being investigated by The FTC and facing numerous lawsuits after dozens of customers complained their withdrawal requests were not executed. The FTC also alleges that Beam’s misrepresentations that misled thousands of customers violated the FTC Act and that their promised high interest rates were not paid to customers.
On November 19, Beam and its CEO Yinan “Aaron” Du, also known as Aaron Du, 37, were charged by the FTC in a federal lawsuit with unfair or deceptive acts.
Affiliate director of the FTC’s Division of Financial Practices Malini Mithal said the FTC is going to court to be sure Beam is held “accountable,” adding they are seeking an order against Beam that would “prohibit it from ever engaging in this type of misconduct again.”
Andrew Smith, Director of the FTC’s Bureau of Consumer Protection agreed. ”Beam Financial promised convenient 24/7 access to savings, but then people had to wait weeks or months to get their money," said Smith.
In October, a CNBC and CNBC.com investigation reported Beam had not lived up to its promises of higher rates of interest on FDIC-insured deposit accounts. The start-up launched its FinTech app in 2019, marketing to millennials with snappy advertising promises of the first high-interest bank account for everyday people.
During the investigation, numerous clients said their withdrawal transactions were having problems processing while others said their numerous endeavors to get help getting their money from Beam went unanswered.
In a company statement, Beam noted $2.4 million in new deposits from about 30,000 customers and said it has now posted requests for “98% of all affected customers” with about $17,000 of requests still unresolved.
Though most customers are now seeing their money in their accounts, the FTC is still looking to head to court.
When the Beam app was launched in 2019, engaging ads popped up on social media, featuring young people enjoying the app, and promising everyone they could “Earn as much as 7% interest on your savings by opening an account with a new start-up.” Their welcoming promise to potential customers positioned Beam as the "first mobile high-interest bank account designed for the 99%.”
The business model, shared on the company’s website, relies upon Beam offering software services to financial institutions. At the same time, customers can boost their earnings by inviting friends to successfully interact on the app. This process, called “Billies,” will boost a customer’s annual percentage rate up to seven percent for one day.
As the website explained, if those friends then opened up an account at Beam, their base minimum rate could go up permanently to four percent. Currently, the percentage rates for FDIC accounts hover around 0.05 percent.
The FTC Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the US District Court for the Northern District of California.
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