The Consumer Financial Protection Bureau (CFPB) has sued Walmart and a financial technology company called Branch Messenger on grounds of coercing more than a million delivery representatives by charging them exorbitant fees for setting up deposit accounts needed for accessing paychecks.
The proceedings were reported on the earlier Monday, which claimed that the Giant Retailer and Branch Messenger had violated entitlement and strained the Spark Drivers—freelancers delivering packages for Walmart—on incurring unnecessary financial obligations. The drivers, according to the CFPB, were opened deposit accounts for Spark Driver without giving their consent using highly personal and sensitive information such as Social Security numbers.
The drivers, from 2021 onward, were informed that any payment would be deposited into these branch accounts and were made to feel that they would lose their job if they refused to comply. The further allegations are that, in reality, it was very difficult to access earned wages, sometimes taking weeks, notwithstanding the assurances that they enjoyed instant access.
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To make things worse, the CPFB found that those drivers paid up to $10 million in junk fees to allegedly move their earnings from branch accounts to another bank account. “Companies cannot coerce employees into getting paid through accounts that skim their earnings with junk fees,” said Rohit Chopra, the Director of CFPB, in a statement.
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Walmart and branch respond to allegations
Well, Walmart has denied every claim and promised to legally fight the lawsuit in court. Walmart accused the CFPB of being “hasty” with an accusation-laden statement released on Monday. “The CFPB’s hasty complaint is rife with factual and exaggerated misstatements of settled principles in the law,” said Walmart. Besides, the company alleged that the agency denied it the due opportunity to present the defense at the time of investigations.
Branch Messenger also rejected such allegations, asserting that it has built a platform for workers with quick and easy access to funds. The company claims that the CFPB is engaging in grandstanding. According to a statement from Branch, “Despite the company’s massive cooperation with the investigation, the CFPB has refused to engage in any meaningful way with Branch about this matter and instead rushed to file a lawsuit.” Other allegations include misleading advertising allegations, not conducting error investigation and resolution, and many other regulatory implications, according to the complaint by the CFPB against the branch.
Broader implications for gig workers
The lawsuit marks an important step in the discussion regarding worker rights and the status of gig economy workers, who are often denied the traditional benefits and protections awarded to employees. Spark drivers, who are characterized in the suit as predominantly female, lower income, and without any college degree, are becoming part of a steadily growing group that relies increasingly on freelance employment through apps such as Uber, Lyft, and DoorDash.
The CFPB, which has filed this lawsuit, partakes in other big-ticket items brought before the courts by the Biden administration. Earlier in the month, the bureau initiated a suit against prominent banks like JPMorgan Chase and Bank of America, charging them with criminal negligence for not preventing fraud against the money-sending app called Zelle.
Among other factors, the fate of this lawsuit would be dependent on specific future leadership developments at the CFPB, particularly as the political dynamics shift. Financial policy analysts posit that the case direction would largely depend on the face that leads the agency in the coming years, especially in the case of a change in administration.
As the dispute goes on, it clearly enables demarcation between legislation and safety from the exposure of gig workers to exploitation in a continually changing labor market. Both Walmart and Branch would have heavy rain from the merciless eye of the CFPB in their efforts against their accused acts.
