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Financial Services Law Insights and Observations

OCC FinTech Proposal Draws a Range of Comments from Industry Stakeholders

Banking OCC Miscellany Fintech

Consumer Finance

A number of stakeholders submitted comment letters this week in response to the OCC's recent proposal to move forward with developing a special purpose national bank charter for financial technology (“FinTech”) companies and accompanying white paper outlining the OCC’s authority to grant such charters to FinTech companies and potential minimum supervisory standards for successful FinTech bank applicants. With the comment period for its white paper closing this week, the bank regulator drew a range of reactions from the stakeholders, several of which are described below:

Consumer Bankers Association (CBA): In its comment letter, the CBA noted that the OCC needs to provide more clarity about the regulatory and supervisory framework that will be applied to FinTech companies, and to proceed cautiously and “provide the public with more information about the potential risks and rewards presented by” FinTech companies. The trade association recommended that the OCC utilize its new Office of Innovation and Responsible Innovation Framework to conduct a study of the FinTech sector to provide sufficient information to evaluate the need for and public benefits of a FinTech charter. Although the CBA confirmed support for “any effort to enhance the ability of banks to innovate,” it stated that it could not “yet support the inclusion of fintech companies into the federal banking system.”

Independent Community Bankers of America (ICBA): In its comment letter, the ICBA stressed the need for the OCC to issue new chartering rules pursuant to the procedure under the Administrative Procedure Act, in consultation with the other bank regulators, and that ultimately these new institutions should be subject to the same supervision and regulation as community banks. The ICBA also expressed “strong concerns about issuing special purpose national bank charters to fintech companies without spelling out clearly the supervision and regulation that these chartered institutions and their parent companies would be subject to.”

American Bankers Association (ABA). The ABA’s comment letter expressed support of a special purpose national bank charter for FinTech companies, as long as existing rules and oversight are applied evenly and fairly. The letter noted, among other things, that significant benefits of financial innovation for consumers are “only realized when innovations are delivered responsibly,” which can be ensured by regulation and oversight. The letter added that “answers to many difficult questions should be made before granting any special purpose charter, including how to ensure that regulations and consumer protection are applied evenly; what protections must be in place to preserve existing laws regarding the separation of banking and commerce; and how would enforcement of operating agreements be accomplished.” The ABA also urged the OCC to work with other agencies “carefully and cooperatively” before any new charter is approved.

Financial Services Roundtable (FSR): Finally, a comment letter submitted by the FSR commended the OCC for developing the proposal, noting that regulations and regulators need to evolve with technology and changing customer preferences. The FSR letter noted that the OCC’s initiative should ensure parity among national charters, and not result in a two-tiered national banking system under which special purpose FinTech banks are subject to compromised supervisory standards. The letter added that to ensure parity in regulation and supervision, “the OCC may find it necessary to re-evaluate some standards applicable to full-service national banks and, as mentioned previously, examine the existing regulatory constraints inhibiting national banks from engaging in responsible innovation.”

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