UPDATE: This article includes comments from a Branch Messenger spokesperson.
The Consumer Financial Protection Bureau sued Walmart and payment app Branch Messenger for illegally opening 1 million deposit accounts for delivery drivers and misrepresenting same-day access to their pay.
In the lawsuit filed Monday, the CFPB alleged that workers in Walmart's Spark Driver program paid more than $10 million in fees and were forced to receive their pay using the Branch app or face being terminated. The bureau said Walmart drivers had to follow a complex process to access their funds through Branch, a fintech company that offers deposit accounts at $1.7 billion-asset
"Walmart made false promises, illegally opened accounts and took advantage of more than a million delivery drivers," CFPB Director Rohit Chopra said in a press release. "Companies cannot force workers into getting paid through accounts that drain their earnings with junk fees."
Walmart did not respond immediately to a request for comment.
A Branch spokesperson said the Golden Valley, Minnesota, company "strongly disagrees" with the lawsuit and claimed that the CFPB misstated the law and facts.
"Branch stands behind its model and services and will defend this action vigorously," the spokesperson said. "Despite the company's extensive cooperation with its investigation, the CFPB refused to engage with Branch in any meaningful way about this matter, instead rushing to file a lawsuit. This approach makes clear that this litigation has nothing to do with the law or protecting workers and everything to do with the media attention garnered by a lawsuit involving one of the world's biggest retailers."
The 60-page lawsuit, filed in U.S. District Court for the District of Minnesota, alleged that Branch opened accounts for new drivers using their names and Social Security numbers without their consent. Their pay was deposited without authorization into the accounts and drivers could not access their earnings without agreeing to Branch's terms and conditions, the CFPB said.
For about two years starting in 2021, drivers in Walmart's Spark program for last-minute deliveries paid more than $10 million in fees to Branch to instantly transfer money to other accounts.
The workers reported delays in receiving their physical debit cards, preventing them from withdrawing cash. Since mid-2022, Branch charged account holders a $2 fee for each cash withdrawal out of its ATM network, and Spark drivers had difficulty accessing in-network ATMs. Drivers could not write checks from their Branch accounts and could not make their own deposits without paying fees, the CFPB said.
Branch placed limits on ATM withdrawals that prevented consumers from withdrawing enough cash to pay their bills on time, the CFPB said. Workers that did not want to pay fees had to wait longer to transfer money from Branch into another account, the bureau said. Further, Branch account holders who wanted to deposit a check to their account had to download a separate mobile application that partnered with Branch — and pay a separate fee to that app — and Branch did not disclose the fee to account holders, the bureau said.
"Whether they decided to transfer their wages or keep them in a Branch account, Spark drivers faced barriers at every turn," the CFPB lawsuit stated.
Because Walmart classified its drivers as independent contractors for tax purposes, Branch typically labeled the bank accounts as business accounts, with business account terms and conditions. The account holders were prohibited from using their accounts for personal, family or household purposes, which meant they were not entitled to the protections under the Electronic Fund Transfer Act and other federal consumer financial law, the bureau said.
As a result of the business account designation, Branch did not ask individual account holders for permission to open the accounts and did not perform a know-your-customer review before opening the accounts, the CFPB said.
Branch's failures to comply with the law made the accounts riskier for consumers, the bureau said.
"Branch did not respond in a timely manner, and sometimes did not respond at all, to consumers who needed assistance from Branch customer service, including for potential fraud on their account," the lawsuit stated.
The CFPB's lawsuit seeks to stop what the agency called "unlawful conduct," to provide redress for harmed consumers, and to impose a civil money penalty that would be paid into the bureau's victims relief fund.
