The saga of Tomo Credit has recently taken a perplexing turn, highlighted by numerous consumer complaints regarding their subscription service’s cancellation process. The issues began to escalate in the fall of 2022 when many users took to social media platforms, particularly Reddit, to express their frustration over the Tomo credit cards abruptly ceasing to function. Initially launched in 2019, Tomo Credit was intended to help immigrants, international students, and other U.S. residents with limited credit histories. However, numerous reports emerged detailing users being unable to access reward funds within their accounts. Tomo’s customer service responses indicated the temporary closure of accounts under the guise of “system updates,” leaving many users in the lurch.
In a recent interview, Tomo CEO Kristy Kim indicated that the company pivoted its business model in mid-2023 from issuing credit cards to providing a subscription service aimed at helping individuals improve their credit scores. This shift came on the heels of a troubling revelation about the company’s financial health, as evidence surfaced that Tomo defaulted on a $30 million line of credit with Silicon Valley Bank (SVB) earlier in the year. According to a lawsuit filed by SVB in New York, this default occurred despite Tomo’s prior announcements that they had secured significant funding, including a $100 million debt financing round and equity investment from reputable backers like Mastercard and Morgan Stanley. Strangely, this funding did not appear in the lawsuit, nor did Kim provide clarification regarding the situation when approached.
Following the initial excitement of securing funding, Tomo’s financial troubles quickly emerged. By April 2023, the lawsuit indicated that there were multiple “events of default” on a special purpose vehicle loan that Tomo had entered into with SVB. The bank initially offered a forbearance agreement to the startup, extending the timeline for a crucial payment. Unfortunately, Tomo missed this payment deadline, leading to the eventual lawsuit. Notably, this timeline coincided with the broader crisis experienced by SVB, which faced regulatory takeover and reorganization under First-Citizens Bank & Trust Co. in March 2023.
By late September 2023, internal documents confirmed that Tomo had ceased obtaining new credit for its credit card operations, casting doubt on CEO Kim’s assertions about continuing to offer the card to select customers. In January 2024, records indicated that Tomo eventually settled their outstanding debt with SVB, however, their banking relationship with Community Federal Savings Bank was also reported to have terminated by early 2024. Currently, Tomo’s website lacks any mention of banking partners, raising further questions about the viability of their credit offerings.
The overall landscape of Tomo Credit has been marred by increasing dissatisfaction from consumers. In the past year alone, the Better Business Bureau recorded over 550 complaints against Tomo, primarily focused on issues related to subscription cancellations. Comparatively, this level of dissatisfaction rivals that of much larger banking institutions. The complaints prompted scrutiny into Tomo’s customer service practices, particularly concerning the cancellation process, which was found to be frustratingly complicated for users.
In response to the mounting criticism, Tomo made a timely update to its app, introducing a “Cancel Membership” option on October 9, 2023. This change suggests an acknowledgment of user grievances and aims to improve customer experience in light of the app’s previous limitations. Despite this, the broader implications of Tomo’s financial defaults and customer service missteps leave uncertainty hanging over the company’s future and its ability to effectively meet the demands of its clientele in a competitive financial landscape.
