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Under Renewed Fire, the OCC Moves Forward with its Fintech Charter Plan

The Office of the Comptroller of the Currency is moving forward with its plan to enable fintech companies to become special purpose national banks (SPNBs), releasing a licensing manual draft supplement which provides guidance on how the OCC “will apply the licensing standards and requirements in its existing regulations and policies to fintech companies applying for [SPNB] charters“ and another document that summarizes public comments about the plan to allow SPNBs for fintech companies. The special purpose charter has no shortage of critics, but perhaps the most vocal—New York State—has turned up the dial on its opposition.

The OCC on Dec. 2, 2016, released a proposal for awarding 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. Comments on the supplement are due April 14 and may be submitted to specialpurposecharter@occ.treas.gov.

Together with the supplement, the OCC released a summary of the comments it has received about the fintech charter proposal. Some of the comments in support of the proposal include:

  • A national charter would provide fintech companies with uniform, clear and consistent supervision and regulation.
  • Having a national bank charter would eliminate the need for state-by-state licenses, thereby reducing regulatory burdens and costs and facilitating growth.

Some of the concerns raised by opponents include:

  • The potential for consumer harm, given that a fintech company chartered as special purpose national bank could avoid providing consumer protections required by state laws or federal laws that only apply to deposit-taking banks.
  • The OCC has not limited SPNB charters to fintech companies, and thus the charters could be used by payday lenders.

State regulators, Democratic U.S. senators and community bankers have criticized the proposal for a new fintech charter. New York State Department of Financial Services (NYDFS) Superintendent Maria Vullo in January questioned why the OCC wanted to charter fintech firms given that the agency had not identified any deficiencies at the state level to justify those charters.

On March 15, Vullo spoke out against the plan again. The “imposition of an entirely new federal regulatory scheme” upon existing state oversight “will invite efforts to evade state usury laws and other consumer protections, stifle small business innovation, create institutions that are too big to fail, and increase the risks presented by nonbank entities.” The NYDFS also challenged the OCC claim that it can set up fintech charters without congressional authorization under the National Bank Act.

That’s not the only challenge the OCC proposal faces. In a letter dated March 10, all 34 Republican members of the Financial Services Committee of the U.S. House of Representatives asked the OCC to avoid rushing is charter decision so that the industry has time to better digest the plan.


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