After Billion-reais Investment, Brazilian Unicorn C6 Bank Faces First Image Challenge

RIO DE JANEIRO, BRAZIL – It was still 2020, early December, when a group of 40 investors, led by Credit Suisse, invested R$1.3 billion (US$240 million) in C6 Bank.

Another Brazilian unicorn was born. A Unicorn is a company in the startups world that is worth more than US$1 billion. There is a reason for its quick success. With only two years of existence, the bank already serves over four million clients.

It is innovative. It adopts the zero tariff model. It has a partnership with TIM, one of the largest telecommunications operators in the country. It offers a wide range of products. It is a bank and not just a payment institution like other fintechs. Some see C6 with potential to compete head-on and even outperform fintech Nubank, today’s sixth largest financial institution in Brazil in terms of number of clients.

But its positive image is being threatened by the first big crisis involving the institution. The bank is being accused of granting payroll loans to retirees who did not authorize the transaction, and charging interest above market rates.

There are thousands of complaints at the Central Bank, several at the Ministry of Justice, several lawsuits and hundreds of complaints at São Paulo’s PROCON, which led the institution to charge a fine of over R$7 million to the bank. The INSS (Social Security Office) responsible for managing payroll credit, notified the bank, calling for action and threatening to remove permission to make this type of loan.

Faced with so many complaints, C6 chose to remain silent. The bank said it would not comment on the PROCON fine. Asked about the continuous complaints, it commented through its communication department, that it holds 10% of the payroll market in the country, that sales are performed through correspondent banking and that, when problems are detected, they register for the correspondent to act. The problem is that the issues have been detected for months. They have not suddenly emerged.

João Antonio Motta, an attorney specializing in banking cases, says that the case of C6 is explicitly an example of misuse of customer data. He says that it is common for payroll loans to be granted only with the client’s individual taxpayer registry number (CPF). Someone calls a retiree, says that he could receive a given amount of money in his account and, when the person inquires as to how it works, the attendant asks for the CPF. According to Motta, the main problem is that these companies work with goals and therefore many employees may stray from their path.

Fernando Capez, PROCON’s São Paulo director, says the organization has received more than 600 complaints from retirees saying they did not authorize the loans. When the money was credited to their account and clients complained to C6, there was no assistance. Moreover, it was charged with a fine and interest.

According to Capez, C6 claims that the clients had their signature on the contracts. In turn, clients claim that their signatures are forged. The case will now be forwarded to PROCON’s Consumer Crimes Department for a graphical analysis of signatures. “C6 says it is unaware, that it may be caused by some outsourced workers. It doesn’t matter because the bank has joint liability,” he says.

The information passed on by the INSS shows that C6 does not have a Technical Cooperation Agreement, required to conduct operations together with the institution. But in August last year, C6 bought Ficsa, a bank authorized to perform these operations.

INSS says that the institution does not figure among those with the highest number of complaints. “But irrespective of the situation, the INSS asked C6 Bank for a plan to reduce the complaints related to payroll loans, including the option of terminating the settlement agreement with Ficsa-C6, in case of failure to submit it or non-compliance with the clauses in the agreement,” he says.

If C6 Bank does not top the list of INSS complaints, the bank is ranked at the top of the Central Bank’s complaints. In absolute numbers, it is the institution with the highest number of complaints: 7,802.

If the number of clients is considered according to the number of complaints, C6 ranks second on the list of the Central Bank’s secondary group of banks and financial institutions. The overwhelming majority of complaints are related to payroll loans. The Central Bank has not stated what steps it will take.

Fintechs value their image when it comes to customer service. Many of the founders of these companies say that they decided to found their business as a way to bring an alternative to the service received from big banks. C6, which was founded by former partners of BTG Pactual bank, a bank focused on wholesale lending, is facing a common crisis for years in traditional institutions and with many customers.

After the funding it received from its investors, the fintech has the power to grow rapidly. It must now overcome the problems of such growth.