A focus on boosting innovation and access to consumer and small to medium enterprise (SME) credit through FinTech will likely be a top priority of Congress and the Trump Administration. This means that regulators will continue to grapple with how best to spur innovation, while ensuring protections are in place for consumers and small business owners.
One focal point is a proposal by the Office of the Comptroller of the Currency (OCC) that would create a national charter for FinTech lenders, including many marketplace lenders that extend credit to small businesses. The OCC’s proposal would create a special purpose national bank charter for FinTech businesses that are engaged in at least one of the three core banking activities: receiving deposits; paying checks; or lending money.
A charter would create a clear set of rules for FinTech lenders, provide them with preemption from state laws, and deliver access to alternative funding sources. However, a charter would require FinTech lenders to be subject to most of the same laws, regulations, examinations, reporting requirements and ongoing supervision as other national banks. This includes adopting complex compliance management systems and meeting enhanced prudential regulatory demands. The OCC collected comments on the proposal through January 12 and is likely to issue a revised draft after reviewing feedback from stakeholders.
However, there has been some opposition to the creation of a special charter for FinTech lenders. On January 9, Senator Sherrod Brown (D-OH), the top Democrat on the Senate Banking Committee, and Senator Jeff Merkley (D-OR) sent a letter to the OCC raising concerns about the agency’s proposed charter for FinTech lenders.
In particular, Brown and Merkley questioned whether the OCC has the authority to grant a national charter to non-depository institutions, which they suggest appears to be the primary candidates for the charter. The Senators suggest that offering a charter to FinTech companies, which do not collect deposits, would be at odds with the OCC’s goals of financial stability, financial inclusion, consumer protection and separation of banking and commerce. They also raise concerns that the charter would provide exemptions to state consumer protection laws.
There is no doubt that there is more to come on this issue in the coming weeks and months, and it will be very interesting to see what happens.