Behind The Pivot: Before Tomo Dropped Its Credit Card Business, It Defaulted On An SVB Loan

Last fall, on a popular Reddit message board, dozens of consumers fumed about how their credit cards from San Francisco startup TomoCredit had abruptly stopped working. The card, first launched in 2019, was designed to serve immigrants, international students and other U.S. residents with thin files at the credit bureaus. Some Redditors said they could no longer access rewards funds locked in their accounts. Others reported that Tomo’s customer support team had responded to their complaints, confirmed the accounts would be closed and written, “We have paused the Tomo Card due to system updates.” To Forbes’ knowledge, Tomo hasn’t restarted its credit card business since then.

When we spoke with Tomo CEO Kristy Kim just last week, she said she had pivoted Tomo in the summer of 2023 from a credit card to a subscription service that boosts your credit score so that she could serve a “broader client group.”

But after receiving a tip from a reader, we learned that Tomo defaulted on a $30 million line of credit from SVB
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in early 2023, according to a lawsuit SVB filed in a New York state court, and that the startup subsequently lost access to its SVB funding. The missed payments to SVB were exceedingly strange given that, in July 2022, Tomo announced it had raised $100 million in debt financing and $22 million in equity investment from backers including Mastercard and Morgan Stanley. (There is no mention in the lawsuit of a $100 million commitment, and Kim didn’t respond to our multiple requests for comment over three days this week about the funding, the lawsuit or the status of the credit card.)

Have a story tip? Contact Jeff Kauflin at jkauflin@forbes.com or on Signal at jeff.273.

Within months of broadcasting the news of its fundraise, Tomo had trouble making payments on the $30 million line from SVB–or it simply decided not to make the payments. By April 2023, Tomo had already experienced “at least seven events of default” on a special purpose vehicle loan, according to the lawsuit SVB filed in July 2023. Tomo had entered into forbearance with SVB that April, with the bank agreeing to give the startup until the end of May, at the latest, to make a $1.75 million payment. Tomo missed that deadline too and hadn’t made any payments by the time SVB filed suit. (In March 2023, SVB was taken over by the FDIC and became a division of First-Citizens Bank & Trust Co.)

In late September 2023, Tomo and SVB “ceased extending new credit for the credit card operations,” according to a sworn statement from Kristy Kim filed in the suit. In January 2024, Tomo paid SVB the $5.1 million it owed, according to court documents, and the next month, both parties agreed to dismiss the case. Jason Mikula, the publisher of Fintech Business Weekly, also tweeted the news of the 2023 SVB lawsuit earlier today.

Last week, Kristy Kim told us that Tomo still makes a credit card available to a “select” group of customers. Now it’s unclear how that’s even possible. New York-based Community Federal Savings Bank, which was Tomo’s bank partner that issued its credit card, had already ceased working with Tomo as of early 2024, according to a document viewed by Forbes. Today, Tomo doesn’t list any banking partners on its website. An SVB spokesperson also declined to comment.

The loan default and confusion is another odd chapter in the saga of TomoCredit, which has been the target of a surge in consumer complaints from people who’ve had trouble canceling their Tomo subscriptions. As we reported earlier this week, over the past year consumers have filed 557 complaints to the Better Business Bureau about the startup, many of which focus on problems canceling the service. (To put that level of customer dissatisfaction in perspective, PNC Bank, the sixth largest bank in America with more than 10 million customers, received 599 Better Business Bureau complaints over the same year.) After we asked Kim pointed questions about a Tomo customer’s case and the absence of an online option to cancel a Tomo subscription, Tomo updated its app on October 9 to include a “Cancel Membership” button.