
Chime is not a real bank. Chime is a financial technology (fintech) company offering a variety of online banking services. Chime partners with FDIC-insured banks, currently The Bancorp Bank, N.A. and Stride Bank, N.A.
It’s these banks that actually hold Chime customers’ deposits and provide the FDIC insurance.
Chime customers have limited rights under state and federal laws to resolve account issues unlike customers of licensed banks.
Here are the primary reasons Chime is not a bank:
1. Chime is not chartered by the federal government. Banks with federal charters are called “national banks” and are regulated by the Office of the Comptroller of the Currency (OCC). The OCC enforces consumer protection laws like fair lending practices, transparency in fees, and proper handling of customer complaints.
2. Chime is not regulated by any state agencies. Banks with state charters are regulated by the banking authority of their specific state. State regulators have consumer protection laws and regulations, separate from federal regulations; plus, state agencies also have a consumer complaint process.
3. Customer deposits are not held at Chime. Chime doesn’t hold customer funds directly. They partner with FDIC-insured banks (currently The Bancorp Bank and Stride Bank) to hold customer deposits.
4. Chime is a financial technology company. Chime’s primary focus is its financial app and technology platform. They provide the user interface, features, and customer support, but outsource core banking functions to their partner banks. Banks are traditional financial institutions that typically offer some type of free checking along with a wide range of financial services and products, under one roof, that most fintechs don’t offer.
5. CFPB Oversight. The Consumer Financial Protection Bureau (CFPB) is the primary federal agency overseeing fintech companies like Chime. The CFPB focuses on consumer protection laws related to financial products and services.
One of the major reasons to consider alternatives to Chime is the enormous amount of complaints when compared to licensed banks that have way more customers like Chase, Bank of America and Wells Fargo.
Don’t get me wrong, these large banks have their share of complaints but when compared to Chime, it’s a little off-putting.
Considering Chime has over 22 million customers, in the last 3 years they’ve amassed over 8,076 complaints with the Better Business Bureau (BBB).
When compared with Wells Fargo, a bank with 68 million customers and a well-documented record of unethical practices, Chime has managed to garner more BBB Complaints in the last 3 years.
May 7, 2024, the Consumer Financial Protection Bureau (CFPB) issued the penalty after finding that Chime delayed thousands of customer refunds for weeks and sometimes up to 90 days, inflicting significant financial harm on individuals who simply wished to close their Chime accounts.
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.
Here is one such complaint to Chime on Facebook where they refuse to refund a customer’s $14,000 balance after 4 months of funds being held:
Feb. 27, 2024, the California Department of Financial Protection and Innovation (DFPI) entered into a consent order with Chime regarding the accuracy and responsiveness of Chime’s handling of customer service transactions. Chime was ordered to pay $2.5M in penalties and improve customer service standards due to unfair complaint handling.
Here is a 2023 Twitter post regarding Chime’s handling of a customer complaints:
Chime customers have reported being denied a refund after the investigation and if they were granted a provisional credit, that amount is later debited from their accounts.
Hi Well, I had unauthorized transactions on my account on my Chime account and I tried to get them disputed and y’all team won’t give me my money back. Yeah I cancelled my cards and got sent send new cards and all my transactions are being denied so I talked to a lawyer.
— Yah’Lay (@yahlaymusic) July 20, 2023
Here is a Reddit post regarding the reversal of provisional credit.
A 2021 Propublica study found that Chime closed or froze customer accounts when potential fraudulent activity was thought to have occurred. These actions were carried out without any prior warning, leaving customers in the dark and without access to funds.
It was found that a significant number of account closures were triggered by the company’s suspicion of fraudulent federal stimulus checks and unemployment insurance deposits. What’s worse is Chime had actively promoted opening accounts with these specific types of funds through an extensive marketing campaign.
Confused customers made complaints and sought answers as to why their accounts were abruptly shut down but Chime failed to offer satisfactory explanations. Only after facing significant backlash, Chime admitted to making “mistakes” in handling the situation and acknowledged the mishandling of customer accounts.
Chime can be confusing. If you recall hearing the term “Chime Bank”, you’re not alone. That’s because for many years Chime® referred to itself as a bank.
However, in 2021 Chime® was restricted from referring to its business as a bank after reaching an agreement with the California Department of Financial Protection and Innovation.
The California agency ordered Chime to cease and desist using the word “bank” because no organization has the right to portray itself as a bank or credit union unless it possesses the necessary license to conduct banking operations.
1) No Monthly Fees or Minimums. The checking account is referred to as a “Spending Account”. Customers enjoy many of the same benefits offered by checking accounts with no overdraft fees, no minimum balance requirements, no foreign transaction fees, and no monthly service fees.
2) Chime SpotMe®. Chime SpotMe® provides overdraft protection up to $200 by allowing Chime customers to make debit card purchases that overdraw on their accounts with no overdraft fees1. Chime’s website says, “limits start at $20 and can be increased up to $200 or more, based on factors such as account activity and history.”
3) Early direct deposit. Customers with direct-deposited paychecks, government benefits, tax refund checks as well as government stimulus can get paid up to two days early with direct deposit2.
4) Overdraft fees. There are no overdraft fees. Chime doesn’t allow customers to overdraft their accounts unless you have the Chime SpotMe® feature enabled on your account.
5) Free ATMs. Chime customers can access more than 60,000 fee-free ATMs through the Moneypass ATM network and Visa Plus Alliance ATMs3.
6) Easy to get checking account. Chime does not use ChexSystems to screen new accounts. Chime offers leniency for people with previous checking account problems or bad credit.
7) Check writing. Chime does not offer traditional checkbooks. However, if you need to mail a check, you can have one sent directly from the Chime mobile app by simply entering the payee. Chime will then mail the check for you.
8) FDIC-insured. All customer accounts held with Chime are FDIC insured for up to $250,000 per depositor, through its partner banks, Stride Bank, N.A. (FDIC No. 4091) or The Bancorp Bank (FDIC No. 35444).
Chime’s savings account earns a higher than average rate at 2.00% APY4. But, it’s not like high-yield savings accounts that earn more than double what Chime offers.
Chime offers one of the easiest credit cards to get. Chime’s Credit Builder Secured Visa® Credit Card is one of the rare no credit check credit cards on the market but customers must have a Chime® Checking Account with a minimum $200 monthly direct deposit. There is no minimum security deposit required5.
Pros:
Cons:
Chime® makes it simple to open a checking account, especially for people with a negative checking account history that have ChexSystems and EWS records or for people with a poor credit history.
But with abrupt account closures and improperly addressing fraudulent transactions, Chime could be inadvertently exacerbating the issue of the unbanked in this country.
In 2021, the FDIC reported an estimated 5.9 million people were “unbanked” in 2021, with no checking or savings account at a bank or credit union.
The very people that need a second chance at banking could be the very people excluded by Chime’s practices, leaving more people without access to essential financial services.
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