The Department of Financial Protection and Innovation (DFPI) of California entered a settlement agreement with Chime Financial, Inc. (Chime), a fintech company that is not licensed to operate as a bank or otherwise exempt from licensure, but works with banking partners to issue consumer banking products. The DFPI found that Chime potentially violated California Financial Code Sections 561 and 563 by (1) using the website “chimebank.com” and (2) using the words “bank” and “banking” in certain other aspects of its business.
As part of the settlement, Chime will stop using the website “chimebank.com” in its business unless and until it becomes a licensed bank. Moreover, Chime is required to perform a review of its webpage and advertising to further clarify any references where the term “banking” is used and bolster its description of its role as a “technology, business processor, and marketing service provider to its Bank Partner(s).” It is required to make any such disclosures in bold and/or increased font size and in close proximity to the banking terminology. Chime must also establish and implement policies and procedures designed to ensure compliance with the settlement agreement and submit a written compliance progress report by June 15.
DFPI Commissioner Manuel Alvarez stated fintech platforms labeling themselves as banks are “deceptive to consumers and it’s unfair to actual banks.” The instant action will likely force other fintechs to remove or add clarifying disclosures to similar “banking” references from their websites and advertisements and ensure their website URLs are not misleading.