Chime might call itself the “fastest-growing fintech in the U.S.,” but it has agreed to stop referring to itself as a “bank,” per a new report out of American Banker.
Evidently, the eight-year-old, San Francisco-based outfit was the target of an investigation by the California Department of Financial Protection and Innovation after Chime used “chimebank” in its website address, as well as used “bank” and “banking” elsewhere in its advertisem*nts, according to the agency in a settlement agreement.
As noted by AB, Chime made the decision to settle ahead of a deadline imposed by the regulatory body.
The development won’t surprise anyone familiar with U.S. banking laws. No outfit can represent itself as a bank or credit union unless it’s licensed to engage in the business of banking. The commission that pushed back on Chime issues such licenses and regulates state-chartered banks in the state of California through the Department of Financial Protection and Innovation, and it said in the settlement that “at all relevant times herein, Chime was not licensed to operate as a bank in California or in any other jurisdiction, nor was it exempt from such licensure.”
Chime has at times attempted to draw a distinction between itself and a bank. When the company raised its most recent round of funding — a $485 million Series F round last September that valued the business at $14.5 billion — CEO Chris Britt told CNBC: “We’re more like a consumer software company than a bank . . . It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”
Still, Chime, like many newer fintech companies, has seemingly embraced the term “neobank” and “challenger bank,” and perhaps it’s no wonder. It’s certainly easier to convey to consumers what it is selling, which is banking services that include — in this case — debit cards, spending accounts and savings accounts, all offered through users’ mobile phones.
Given the settlement, expect to see more startups like Chime make clearer that in most cases, they do not have a bank charter and instead are being provided services by banks that do. In Chime’s case, for example, it now makes more plain on its website that it is a “financial technology company” and “not a bank” and that its services are being provided by the The Bancorp Bank and Stride Bank, which are both FDIC members.
FAQs
Chime has agreed to stop using the word 'bank' after a California regulator pushed back. Chime might call itself the “fastest-growing fintech in the U.S.,” but it has agreed to stop referring to itself as a “bank,” per a new report out of American Banker.
Is Chime bank in trouble? ›
The Bureau found that Chime's conduct was unfair in violation of the Consumer Financial Protection Act of 2010. The order requires Chime to come into compliance, pay a $3.25 million civil money penalty, and pay at least $1.3 million in redress to consumers.
What is the legal bank name for Chime? ›
Chime provides all of its banking services through Bancorp Bank, N.A. or Stride Bank, N.A. because it's a financial technology company, not a bank. However, opening an account through Chime and using its app to manage your money is similar to using other mobile banking apps.
Is Chime a regulated bank? ›
Well-Regulated + FDIC-insured
Chime is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC.
Is there an issue with Chime today? ›
Current Chime status is UP.
Why is Chime shutting down accounts? ›
Neobanks, like other banking institutions, may close accounts without notice, typically for specific reasons, such as those mentioned above. Many Chime account closures occurred following a surge in government deposits as Chime worked to verify millions of new accounts for potential fraudulent activity.
What is the lawsuit against Chime bank? ›
CFPB Takes Action Against Chime Financial for Illegally Delaying Consumer Refunds. WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) took action against Chime Financial for failing to give consumers timely refunds when their accounts were closed.
Why is Chime not considered a bank? ›
Chime is considered a neo-bank or rather than a financial institution. It partners with two banks to provide its users with no-fee checking and savings accounts, debit cards, and other financial services. Chime makes money by taking a portion of the transaction fees charged to merchants when people use its debit card.
Who owns Chime bank? ›
Chime was founded in 2012 by Chris Britt (CEO) and Ryan King (CTO). Prior to founding Chime, Britt had previously served as Chief Product Officer at the financial technology company Green Dot and as a senior product leader at Visa.
Where is the Chime branch in California? ›
Chime Financial, Inc, 77 Maiden Ln, Suite 6, San Francisco, CA - MapQuest.
Facing growing incidents of fraud, some merchants have begun limiting or even blocking the debit and credit cards being offered by Chime, Cash App and other neobanks. “Companies used to build financial products starting with the risk,” says a fraud expert and executive at a San Francisco fintech company.
How stable is Chime bank? ›
It has partnered with The Bancorp Bank, N.A., and Stride Bank, N.A., to offer financial products. Both Chime and its partner banks are Federal Deposit Insurance Corp. (FDIC) members, making it a safe banking option. All rates and fees are current as of March 11, 2024, and are subject to change.
Will Chime refund stolen money? ›
Chime may apply a temporary dollar amount to your account while we investigate the transaction(s) you disputed. If we can't resolve your dispute within ten business days (20 business days for new accounts), we may add a temporary credit to your account balance to cover the disputed amount.
Why is Chime declining? ›
In conclusion, a Chime card decline with money in the account can be attributed to temporary connectivity issues, authorization errors, automated fraud prevention measures, or internal errors within the Chime system.
Why not to use Chime? ›
Downsides: Fees for cash deposits and out-of-network ATM usage: Chime charges $2.50 per transaction at out-of-network ATMs, and the only way to deposit cash is at cash deposit partner locations. Cash deposits at Duane Reade and Walgreens are free, but other retailers may charge a fee.
Why is Chime blocking my transactions? ›
Your transactions can decline when you exceed the spending or withdrawal limit on your Checking Account, or the available-to-spend limit in your Credit Builder secured account. To view your spending, withdrawal, and transfer limits in your app: Go to Settings.
Is Chime bank safe right now? ›
Chime is a financial technology (fintech) company based in California. It has partnered with The Bancorp Bank, N.A., and Stride Bank, N.A., to offer financial products. Both Chime and its partner banks are Federal Deposit Insurance Corp. (FDIC) members, making it a safe banking option.
Is your money protected with Chime? ›
We take security seriously.
At Chime, information security is a top priority. Deposits are FDIC insured up to $250,000 through The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. And we work hard to protect your information, such as by using encryption and other measures to help safeguard your money and data.
Is Chime predatory? ›
No, the Chime app itself is not a scam. However, like any online platform, Chime may be targeted by scammers who attempt to exploit its users through various fraudulent schemes.
