Since the Office of the Comptroller of the Currency announced that it plans to offer new national charters for financial technology companies "that offer bank products and services and meet our high standards and chartering requirements," state regulators and advocacy groups have expressed their opposition to the agency’s proposal. The OCC is requestingb comments on 13 specific questions listed in the paper, which must be provided by Jan. 17, 2017.
Comptroller Thomas J. Curry cited several reasons to move forward with the chartering process, with the public interest being the "first and foremost reason." Curry cited the choice to become a national bank as another reason. A third reason was to provide a "clear process, criteria, and standards" that ensures regulators and companies openly vet risks so that fintech companies "have a reasonable chance of success, appropriate risk management, effective consumer protection, and strong capital and liquidity" (see Banking and Finance Law Daily, Dec. 2, 2016).
State regulators object. According to the New York State Department of Financial Services Superintendent Maria T. Vullo, the Department opposes efforts to federalize "what states have been doing—and doing well—for over a century." Vullo urged the OCC not to ignore the states’ "historical role and longstanding expertise" and stated that state regulators are best positioned to protect consumers in "appropriately tailored" regulatory regimes.
Oregon’s Sen. Jeff Merkley (D-Ore) agreed, stating that the fintech market "has the potential for great innovation and expansion of opportunity" but warned that "without proper safeguards, it will become a breeding ground for predatory practices that gouge consumers and small business owners." Merkley expressed concern that the OCC’s plan could weaken consumer protection standards in online lending.
- The Conference of State Bank Supervisors raised three concerns about the OCC’s proposal.
- The OCC’s "subjective criteria" for awarding federal fintech charters would result in a sharp departure from the role of a financial regulator.
- The OCC is expanding its mandate absent statutory authority, while there is no historical precedent for such a charter in the national banking system.
Despite assurances to the contrary, consumers will be at risk due to the OCC’s history of pre-empting state consumer protection laws in ways that damaged consumers.
Chris Feeney, President of BITS, the Financial Services Roundtable’s technology policy division, stated that the FSR will submit comments to the OCC by its Jan. 15, 2017, deadline, but that "We appreciate the OCC’s efforts to advance the conversation and their recognition of the importance of consumer protection and cybersecurity."
The Center for Responsible Lending pointed out that, before the OCC’s announcement, 49 organizations, including several leading national advocacy organizations, sent letters to the Comptroller in opposition to the OCC’s plan. The organization highlighted the dangers of avoiding "state interest rate caps, other state consumer protection laws, and state oversight, putting consumers and small businesses at risk."
According to Courtney Robinson, Policy Counsel at the CRL, the most effective consumer protection laws at the state level "should not be undermined by bad new financial products that could open the doors for predatory lending. A federally-chartered fintech lender would avoid state interest rate caps, leaving people vulnerable to financial services abuse."
Companies: Center for Responsible Lending; Conference of State Bank Supervisors; Financial Services Roundtable
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