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.

Cayce Clifford/Cayce Clifford

The Illinois Department of Financial and Professional Regulation included a $200,000 fine in a similar order against Chime, according to a March 25 settlement agreement.

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 company that operates as a fintech subject to such a DFPI enforcement order, 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 setup 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. Stride, of Enid, Oklahoma, has $1.1 billion of assets; the $6.3 billion-asset Bancorp Bank is based in Wilmington, Delaware.

In an emailed statement late Wednesday, Chime said it "takes its obligations to regulators and consumers very seriously" and pledged to "work collaboratively with the state of California to ensure our products and all products in this space are transparent and always put members first."

"We appreciate the state's partnership and look forward to advancing its interests as we continue to pursue Chime's vision of providing everyday Americans access to financial services that are safe, fair and affordable,” it said.

This story has been updated to include a comment from Chime, as well as to note that Illinois regulators reached a similar settlement with Chime in late March.