Banking

Chime forced to ditch use of word ‘bank’ after regulator’s pushback

The fintech Chime is nearing a deadline to stop implying that it operates as a bank, according to a settlement agreement with California regulators.

The San Francisco-based company was using “chimebank” in its website address, allegedly in violation of a state law that is meant to prevent businesses from misleading the public, according to the California Department of Financial Protection and Innovation, which began an investigation last year.

Chime was also using the terms “bank” and “banking” elsewhere in its advertisements, the agency said in the March 29 settlement agreement.

Chime has agreed not to use the word “bank” in various consumer disclosures under an agreement with California regulators.

Cayce Clifford/Cayce Clifford

The crackdown comes as Chime and other fintechs have been luring consumers away from large banks, most recently with the promise of speeding up payments from stimulus checks that have been slow to wind through the traditional banking system. Chime now has more than 12 million U.S. customers, according to a recent estimate by Cornerstone Advisors and StrategyCorp.

The California agency has issued at least 10 orders against companies involving improper claims of being a bank, a department spokesperson said in an email. But Chime is the first and, so far, only such company that operates as a fintech, according to the spokesperson.

Chime cooperated with the investigation but did not admit any wrongdoing. The company did agree to terms that include providing disclosures on its website and in other materials stating that it is not a bank and that services are provided by its banking partners.

Specifically, Chime must revise language to state that customers can open a checking account “through” the company rather than “opening a Chime bank account,” according to the settlement agreement.

Chime is also required to insert statements into its paid advertisements, such as in Google search ads, noting that banking services are provided by the company’s partners. Chime must name those partners in the disclosures.

Similar changes must be made to Chime’s frequently asked questions page and in the account set-up process for customers on the company’s website. Chime has until May 15 to complete the changes, and must perform quality control checks by June 15, according to the agreement.

Chime’s current website includes language stating that the firm “is a financial technology company, not a bank.” The website also names The Bancorp Bank and Stride Bank as its banking partners. Enid, Oklahoma-based Stride has $1.1 billion in assets, while Bancorp is a $6.3 billion-asset company based in Wilmington, Delaware.

A Chime spokesperson did not immediately respond to a request for comment.


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