Startups like TomCredit and Albert have final valuations in the hundreds of millions of dollars and are the subject of hundreds of consumer complaints.
by Jeff KauflinForbes staff
inSummer of 2023, Felisa Ware, a 55-year-old Michigan resident, wanted to improve her credit so she could buy a bigger house so her sick mother could live with her. She signed up for TomoCredit’s subscription service. The six-year-old startup, founded in San Francisco and backed by investors including Morgan Stanley and Mastercard, will, among other things, help report additional on-time payments such as rent and cell phone bills. promises to improve consumers’ credit scores. , to credit reporting agencies. After six months, Ware decided it wasn’t worth paying $34.99 a month for Tomo’s “VIP” plan. (Typically, Tomo charges an exorbitant fee of $129.99 per month for this level of service; Ware was able to take advantage of a promotion and get it at a lower price.) After searching, I couldn’t find an option to cancel.
Mr. Ware then repeatedly asked Tomo’s customer support to cancel his subscription, resulting in 20 emails back and forth. Instead of honoring her request, Tomo responded with questions about why she was canceling and whether she would like to get a free month instead of deactivating it. At one point, Tomo’s customer support team lost power for five days, then 20 days. “It was very strange and frustrating,” Ware said. Outraged, she emailed the Michigan attorney general and began posting on social media, tagging Tomo’s company account and its CEO, Christy Kim, 35. “They’re extorting people’s money. I work hard for my money,” said Ware, who works in the medical field.
On January 28, 2024, about a month after the initial cancellation request, TomoCredit tried to charge Ms. Ware’s debit card again, but she had already called her bank and blocked future Tom charges. Ta. Finally, on January 30th, her subscription was deactivated. Now, Ms. Ware wonders what will happen to Tomo’s customers who aren’t as persistent as she is. “It reminds me of my mother, who is 78 years old,” she says. “She would be so frustrated that she would still be paying for that service because she would have just given up.”
Tom CEO Kim said the company’s customer service team had “good intentions” and aimed to understand why customers were dissatisfied. “Unfortunately, many of our customers are financially uneducated,” Kim says, adding that her support team “ [users] At least you got the basic benefits we offer. ” After we asked her pointed questions about Felisa Ware and the lack of an option to cancel online, Tomo updated the app on October 9th to add a “Cancel Membership” button .
According to Kim, Tomo has about 100,000 paying members. Over the past year, consumers have filed 557 complaints with the Better Business Bureau about the startup. (Considering the level of customer dissatisfaction, PNC Bank, America’s sixth-largest bank with more than 10 million customers, received 599 Better Business Bureau complaints in the same year.) Most were filed in August and September. He cited issues regarding service cancellation.
The fintech industry’s reputation has taken a hit this year after a flurry of regulatory enforcement actions and the failure of banking-as-a-service provider Synapse to expose flaws in fintech neobanks’ FDIC insurance claims. I got hit. Subscription cancellation issues at several startups could be an even bigger blow.
Last November, New York fintech company Bridget, which offers cash advances of up to $250 for $8.99 a month, was forced by the Federal Trade Commission (FTC) to refund $18 million to customers. The FTC alleged that Bridget used deceptive practices when offering cash advances and made it extremely difficult to cancel subscriptions. Bridget said in a statement at the time that while the allegations were “factually inaccurate,” she decided to settle with the FTC to “put this matter aside.” A Brigitte spokesperson said. forbes Over a year ago, the company improved its cancellation process to make it faster and easier, and can be completed online in two steps.
Albert, a Los Angeles-based digital bank that offers checking, savings and investment accounts, and cash advances up to $250, has received 566 Better Business Bureau complaints in the past 12 months. Many of them are also related to deactivation issues. For this article, we spoke to two former Albert customers. They said they had a hard time canceling their subscriptions. (Mr. Albert did not respond to our multiple requests for comment.)
To be fair, the difficult-to-cancel problem is not unique to fintech. In March 2023, the FTC proposed sweeping “click-to-cancel” rules that would require companies to make it as easy for consumers to cancel subscription services as it is to sign up for them. . The commission received 1,163 public comments but has not yet released a final rule. Rocket Money, a personal finance management app (formerly known as Truebill) that helps consumers cancel subscriptions, names fitness clubs as the worst offenders.
But it’s worth noting that many fintech startups tout their mission to serve consumers who have been left behind or mistreated by traditional financial companies. The issue of cancellation is therefore particularly troublesome.
Have a story tip? Contact Jeff Kauflin at jkauflin@forbes.com or Signal at jeff.273.
KListy Kim released TomoCredit was founded in 2019 as a way for immigrants, international students, and other U.S. residents with thin files with credit bureaus to gain better credit access. This was a problem she herself experienced when she came to the United States from South Korea. For years, the company’s flagship product was a credit card with an unusual twist. Consumers can set up automatic payments that pay off their full balance every seven days, and this feature helps them build up a history of on-time payments and keep their payments in check. Reported credit utilization. In an interview in April 2023, Kim said there were 50,000 active cardholders by the end of 2021.
In the summer of 2023, she pivoted her business and introduced “Tomo Boost,” a subscription service to effectively stop credit cards and improve people’s credit scores. Kim said Tomo’s quick subscription implementation helped the startup return to profitability on a generally accepted accounting principles (GAAP) basis late last year. She expects the company’s annual revenue to reach $20 million by the end of 2024, and says it has enough cash in the bank to continue funding operations for three years. (TomoCredit was last valued at $222 million in funding in 2022, and has raised about $40 million in equity funding, according to PitchBook.)
But despite Tomo’s supposed financial success, the 30-person startup has a small customer service team of just five people, only three of whom are in the United States. . Until just last week, the company’s app and website didn’t have an option to provide customer service online. Canceling even though the customer has been complaining about this issue for at least a year. Why did it take so long to add Tomo? Kim says he was focused on developing what he considers Tomo’s most valuable intellectual property. It’s a proprietary credit score developed by Tomo that hopes to compete with the ubiquitous FICO score.
“We’re a small company. We had a lot going on… We were hiring AI engineers from Google, and we were also working on partnership deals that we haven’t announced publicly yet.” says Kim. “In hindsight, I wish we could have provided that.” [in the app] It would have been better if it had been sooner. ” Her team may have underestimated the number of customer service representatives Tomo would need, she says. Asked if U.S. regulators had contacted TomoCredit regarding complaints about subscription cancellations, Kim said, “Not that I’m aware of.” The startup doesn’t appear to have a full-time general counsel or compliance officer, according to LinkedIn data, and Kim declined to answer our question about whether it has a general counsel or compliance officer.
Difficulty canceling isn’t the only issue Tomo customers are dissatisfied with. In the online description for the top-tier VIP plan, in the first bullet point, Tomo says it offers “up to $30,000 in credit lines.” However, in consumer complaints, many Tomo users said the credit line did not appear on their credit history.
And with so many customers looking to cancel their subscriptions, it’s unclear whether Tomo’s credit increase service will even work. Rocket Money has considered offering credit expansion services but has so far declined, said co-founder and chief revenue officer Yahya Mokhtarzada. He said many of the most common credit scoring models still have no impact, so additional payments reported to credit bureaus (such as rent or cell phone bills) actually have a big impact on people’s credit scores. It is pointed out that it can be difficult to know whether the Don’t take those payments into account. Instead, they stick to “credit” accounts such as bank credit cards, car loans, and mortgages. Additionally, consumers have free alternatives to improve their scores. Experian, one of the three major credit bureaus, offers Experian Boost for free to help consumers report additional payments to the credit bureaus.
N1 year old digital bank Albert, The company claims to have more than 10 million users on its website, but customer complaints have also skyrocketed. Rhonda Hudgins, 62, of Georgia, used the app for small loans in 2020 and wanted to log back in last year to see if she had any money left in her account. Ta. She said Albert required her to sign up for the paid version, which cost at least $9.99 a month, to see how much money she had left. She paid for that access and then tried to cancel using the options provided through Albert’s app. But just like when she tried to cancel in 2021, it didn’t work out, she says. Both times I had to call Albert to cancel and tell him to cancel.
James Riddick, a 51-year-old Brooklyn-based theater manager, spent two days in March 2024 trying to cancel his Albert subscription through the app without success. That was when I contacted customer support and went through further difficulties until my account was deleted and deactivated.
In the past 12 months, consumers have filed 15 complaints with the Consumer Financial Protection Bureau (CFPB) regarding Albert’s subscription cancellation practices. Two cases were filed last month, including one from a Florida resident who wrote that she had “continued to pay for almost two years despite multiple attempts to cancel.” Another common criticism is that to deactivate your Albert subscription, you must first transfer all your funds to bring your balance to $0. “I cannot understand how this is legal,” reads a CFPB complaint from a Pennsylvania resident filed in April. “About $75 in subscription fees were debited for something that was of no use to me.”
Not all fintech apps are this difficult. Empower, a San Francisco-based company that offers cash advances and loans of up to $400 for $8 a month, can be canceled in just three clicks within the app, CEO Warren Hogarth said. Hogarth said customers can cancel their subscription even if they have a loan or cash advance balance. Santa Monica-based Grow Credit offers a virtual debit card that can be used to pay for services like Netflix and Spotify, and the startup claims it can improve your credit score by up to 44 points. The company says consumers can cancel their Grow Credit subscription (one plan is free, the other two cost $6.99 and $12.99) through the app or website, even if they have a loan balance.
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