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Regulator tells Chime to stop using the word 'bank'

Regulator tells Chime to stop using the word 'bank'

US digital banking giant Chime has agreed to stop using the word "bank" in its URL and elsewhere after falling foul of Californian regulators.

As first reported by American Banker, Chime Financial has settled with California's Commissioner of Financial Protection and Innovation over its use of the word.

Founded in 2013, Chime offers a fee-free, user-friendly banking app, which provides an accompanying debit card and auto-savings account.

The firm has taken advantage of the rise in digital banking during the pandemic and hit a $14.5 billion valuation in September off the back of a $485 million Series F funding round.

However, it is not licensed to operate as a bank in California or anywhere else, and instead works with partners that are licensed.

Despite this, until last February the company used the URL address "chimebank.com" and has also been using the words "bank" and "banking" elsewhere.

The Commissioner has been investigating Chime for possible violations of its rules that prohibit firms from "transacting 'business in a way or manner as to lead the public to believe that its business is that of a bank' without actual authority to engage in such business."

Chime has cooperated and settled ahead of a Commission deadline and promised to make necessary changes, removing the word "bank" from its site, app and advertising material.

Chime rival Varo - which has secured a bank charter - has chimed in.

Says CEO Colin Walsh: "The Chime settlement announced yesterday is a reminder of how important it is to be clear with consumers about who they are banking with. Trust is at the core of any long term customer relationship and trust is a big reason for why Varo went through the rigorous process to become a national bank."

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 May, 2021, 12:58Be the first to give this comment the thumbs up 0 likes

Amazing why it takes such a long time for regs to wake up and take punitive action on such an elementary and visible infraction by a neobank - despite having the prior experience of rapping the knuckles of another neobank - then MovenBank - on exactly the same infringment years ago.

Not sure about the academic background of the founders of Chime and Moven but this reminds me of Michael Lewis's somewhat politically incorrect explanation for how Wall St investment bankers were able to score AAA ratings for toxic MBS, CDO and other structured financial products in the runup to GFC: "Top of Class of Ivy League colleges always manage to hoodwink middle of class of mediocre colleges".

The latest Chime incident suggests how regs don't seem to learn from past mistakes and can be hoodwinked by the same crime more than once.

Andrew Smith
Andrew Smith - RTGS & ClearBank - London 07 May, 2021, 15:05Be the first to give this comment the thumbs up 0 likes

There are so many examples of where the term bank and bank account is used when its not the case.....I've no idea how they arent clamped down on pretty instantly...