Chime Financial, Inc.
San Francisco, California
In May 2021, the California DFPI settled with Chime Financial, a neobank that partners with licensed banks to offer banking products, over violations of California Financial Code Sections 561 and 563 related to the unauthorized use of banking terminology. Chime was found to have used terms such as "bank" in its domain name and marketing materials despite not holding a banking charter. Under the settlement, Chime was required to discontinue use of "chimebank.com," place bold disclosures near any banking-related terms, implement internal compliance procedures, and submit a compliance progress report by June 15, 2021. DFPI Commissioner Manuel Alvarez stated that such labeling deceives consumers and creates an unfair disadvantage for licensed banks. The action was seen as a warning to the broader fintech and BaaS ecosystem about the regulatory risks of implying bank status without proper licensure.
Verified from source: The California DFPI entered a settlement agreement with Chime Financial, Inc. for potentially violating California Financial Code by using 'chimebank.com' and the terms 'bank' and 'banking' without being a licensed bank. Chime was required to stop using 'chimebank.com,' add bold disclosures near banking terminology, implement compliance procedures, and submit a written compliance progress report by June 15.
- Sets a precedent for state regulators scrutinizing fintech marketing practices around use of 'bank' terminology
- BaaS partner fintechs must carefully distinguish themselves from their sponsor banks in consumer-facing materials
- Other state regulators may pursue similar actions against neobanks and fintechs that blur the line between licensed and unlicensed banking