Lyft Inc., the ride-hailing startup which was courting trouble after flouting government regulations, has settled its dispute with New York attorney general and will shell out a fine of $300,000.

The office of Eric Schneiderman, the New York attorney general, filed a lawsuit against Lyft in 2014 that sought to block the ride-hailing service from running its operations in Rochester and Buffalo, as well as from beginning services in New York City.

On June 18, Schneiderman's office, along with the New York State Department of Financial Services, revealed they had come to a settlement with Lyft.

"Today's agreement enables Lyft to grow and prosper within the bounds of state and local regulations, while the penalties imposed send the message that companies that attempt to skirt the law will be held accountable," said Schneiderman.

Lyft will pay $300,000 to settle the dispute that the service's foray into Buffalo and Rochester was unlawful as the company did not have the necessary approvals required to operate.

In July 2014, Lyft along with two state agencies had come to an agreement, whereby the company would be permitted to start its service in New York City. Its drivers would have commercial licenses under the city's Taxi and Limousine Commission. However, a month later Lyft had to suspend operations in Rochester and Buffalo owing to the alleged violations.

The ride-hailing service enables users to hail a cab in a matter of minutes by deploying the app on their smartphone. The service's drivers respond to the request and get paid for the fare via the stored credit card details belonging to the customer.

The current consent order requires that Lyft's drivers have auto insurance that authorized insurers in New York have issued. This insurance must also offer coverage for drivers when the app for Lyft is switched on as they attend to requests for pick-up. Lyft also needs to be compliant with state and municipal laws in other territories for vehicles that can be hired to be eligible for offering its service.

Lyft seems to have updated its insurance page to comply with the consent order as it now reads: "Our policy is available in all states in the U.S., except New York state."

In a statement, the company also revealed that the settlement does not require Lyft to make any changes to its existing service in New York.