California’s financial regulator banned online consumer financial services app Chime from calling itself a “bank” or using the term “banking” in its marketing materials, a settlement from a broader inquiry into fintech companies’ marketing practices in the state.
Chime must change the name for its chimebank.com web address by May 15, according to the administrative settlementannounced Wednesday by California’s Department of Financial Protection and Innovation.
The San Francisco-headquartered fintech company also must disclose—on its website and in its advertising—that the financial services it provides are offered through a named banking partner, the DFPI said.
The agency started an inquiry into Chime’s use of banking terms in 2020, according to the settlement. “Chime was not licensed to operate as a bank in California or in any other jurisdiction, nor was it exempt from such licensure,” the DFPI said.
The settlement didn’t include any monetary penalties, and noted Chime had cooperated with the inquiry.
Chime didn’t immediately respond to a request for comment on the settlement.
The DFPI’s inquiry focused on fintech platforms labeling themselves as banks. “It’s deceptive to consumers and it’s unfair to actual banks,” DFPI Commissioner Manuel Alvarez told Bloomberg Law in October 2020.
The Chime settlement will likely compel other fintechs to remove similar terminology from their websites and advertising, said Todd Baker, a senior business, law, and public policy fellow at Columbia University’s Richman Center.
“The DFPI action was absolutely predictable in light of a century or more of tight restrictions on what types of companies can call themselves a ‘bank’,” Baker said. “It also is another sign of Manny Alvarez’s determination to use his agency’s new powers actively,” he said.