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."