WASHINGTON — The Office of the Comptroller of the Currency (OCC) said it will move forward with considering applications from financial technology (fintech) companies to become special purpose national banks.
A trade group representing the banking industry responded that it has “serious concerns” over the proposal.
During remarks at the Georgetown University Law Center, Comptroller Thomas J. Curry offered several reasons for considering special purpose national charters for fintech companies.
“First and foremost, we believe doing so is in the public interest,” Comptroller Curry said. “It is clear that fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.”
The Comptroller also said that considering fintech charter applications provides businesses a choice without creating a requirement to seek a charter. Companies that seek a charter are evaluated to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection, and strong capital and liquidity.
The OCC is accepting comments on the proposal through Jan. 15.
Accompanying his decision, the OCC published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. The paper is in the CUToday.info vault here.
In its white paper the OCC said that if it “decides to grant a charter to a particular fintech company, the institution would be held to the same rigorous standards of safety and soundness, fair access, and fair treatment of customers that apply to all national banks and federal savings associations. The OCC acknowledges, however, that to approve a fintech charter the agency may need to account for differences in business models and the applicability of certain laws. For example, a fintech company with a special purpose national charter that does not take deposits, and therefore is not insured by the Federal Deposit Insurance Corporation(FDIC), would not be subject to laws that apply only to insured depository institutions.”
Bankers Express 'Concern'
In response to the OCC announcement, Camden R. Fine, president of the Independent Community Bankers of America said community banks continue to “have serious concerns with the establishment of a limited fintech charter for nonbank online lenders. While ICBA supports oversight of these unregulated financial firms, a fintech charter poses risks to taxpayers and the financial system by endowing these nonbank companies with a federal bank charter.”
In particular, Fine said the ICBA is “deeply concerned” that nonbank online lenders’ lack of oversight has provided them with regulatory advantages over other institutions—such as highly regulated community banks—while putting consumers and the financial system at risk.
“Any limited fintech charter must hold these companies to the same standards of safety, soundness and fairness as other federally chartered institutions,” Fine said. “Our nation’s fintech regulatory framework should be no less stringent than that which applies to insured depository institutions to ensure a fair regulatory system that protects consumers and supports safety and soundness at these unregulated companies.”
Fine noted community banks are subject to what he called “unprecedented level of regulation, taxation and supervisory review, including an alphabet soup of rules that often do not apply to credit unions, Farm Credit System entities, and nonbanks. To ensure a level playing field, all financial institutions that offer banking services should be subject to the same standards.”