The Consumer Financial Protection Bureau (CFPB) has filed a groundbreaking lawsuit against retail giant Walmart and fintech firm Branch Messenger, accusing them of deceptive practices aimed at more than one million delivery drivers. The federal agency alleges these workers were forced to open deposit accounts without their consent to access their pay, leading them to accrue over $10 million in junk fees over two years.
According to the CFPB, the lawsuit, filed on December 23, 2023, unveils claims of illegal account openings linked to Walmart's Spark Driver program, which enables gig workers to deliver Walmart orders. It alleges Walmart and Branch used the personal information, including Social Security numbers, of these drivers without their knowledge to create accounts.
“Walmart made false promises, illegally opened accounts, and took advantage of more than a million delivery drivers,” stated Rohit Chopra, CFPB Director, emphasizing the agency's commitment to holding companies accountable for their practices.
The lawsuit contends Walmart misled drivers by stating they must use the Branch accounts, labeled as "costly and risky products," or risk losing their jobs. The CFPB claims this pressure resulted in drivers collectively paying over $10 million to transfer their earnings to their personal accounts, with fees reaching as high as $2.99 or 2% of the transferred amount.
Chopra outlined how the drivers faced extensive challenges accessing their funds; contrary to Walmart's claims of instant access, they reported delays and complicated processes, with many expressing frustration over the limitations on transfers and the fees charged by Branch.
Both Walmart and Branch have firmly denied the allegations. A Walmart spokesperson described the CFPB's lawsuit as "riddled with factual errors and exaggerations," arguing the bureau did not afford Walmart the opportunity to present its side adequately before filing the case. The retail company plans to mount a strong defense against what it regards as unfounded claims.
“We look forward to vigorously defending the company before a court,” stated the Walmart representative, maintaining confidence in its legal standing.
Branch Messenger also expressed strong disagreement with the CFPB's claims, asserting the lawsuit misrepresents the facts and law surrounding their service model. “Branch has provided Walmart and their driver partners valuable services allowing quick and easy access to funds,” the company stated, insisting they would defend their practices vigorously.
The lawsuit alleges Walmart and Branch started these practices around 2021, violating federal consumer protection laws. Drivers reported significant delays and complications when attempting to move their wages from the Branch accounts, with many feeling threatened over their jobs if they did not comply with the company’s directives.
Critics have noted the broader implications of this legal dispute, highlighting the lack of protections afforded to gig workers within the U.S. Many are left to navigate challenging payment systems without adequate support. The CFPB’s action aims to shine light on systemic issues within gig economy employment practices, invoking concerns over worker rights and corporate accountability.
Following the suit's announcement, the conversation surrounding consumer protection and the ethical obligations of employers has intensified, especially as federal regulators ramp up scrutiny against fintech companies and larger retailers alike.
This lawsuit accompanies other recent legal actions taken by the CFPB against financial institutions for practices deemed unfair to consumers. It follows earlier lawsuits involving companies such as JPMorgan Chase, Wells Fargo, and Bank of America for failing to safeguard customer interests.
The outcome of this lawsuit could set precedence not only for Walmart and Branch Messenger but also for the broader gig economy as regulators continue to explore compliance and ethical standards among companies relying on contract labor.
With the federal case now underway, attention now turns to how the court will interpret worker protections and corporate responsibilities, as both sides brace for what could be significant legal battles. The lawsuit also invites scrutiny at the intersection of technology, consumer rights, and employee welfare, raising questions about the future of gig work and how companies manage their responsibilities to workers.
