New York has put its money where its mouth is by officially opposing the plan from the Office of the Comptroller of the Currency to enable fintech companies to become special purpose national banks. A lawsuit from New York State Department of Financial Services Superintendent Maria Vullo describes the proposal as “reckless folly.”
The OCC on Dec. 2, 2016, released a proposal for awarding special purpose national bank charters to fintech firms if they fulfill multiple requirements, including performing “core banking services” defined as receiving deposits, paying checks or lending money. The idea is to promote financial inclusion and regulatory consistency, and to strengthen the federal banking system, among other goals, the OCC said. On March 15, the agency released a 24-page supplement, which discusses how the agency will supervise fintech firms that become banks.
New York argues that the plan will harm consumers by allowing fintech firms to get around certain regulations, and that the proposal exceeds the OCC’s regulatory authority. “The fintech charter decision is lawless, ill-conceived and destabilizing of financial markets that are properly and most effectively regulated by New York State,” the suit says. “It also puts New York financial consumers—and often the most vulnerable ones—at great risk of exploitation by federally chartered entities improperly insulated from New York law.”
New York’s view matches criticism from other groups. For instance, the Conference of State Bank Supervisors recently filed suit in the U.S. District Court for the District of Columbia challenging the proposal. State regulators, Democratic U.S. senators and community bankers also have come out against the plan.
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