The OCC Moves Ahead With Its Fintech Bank Charter, but Blowback Grows

The Office of the Comptroller of the Currency has provided additional details about evaluating applications for its proposed limited-purpose national bank charter for financial-technology companies, but voices critical of the charter are growing louder.

The OCC, a unit of the U.S. Treasury Department that regulates national banks, first proposed the fintech bank idea in December as a way to broaden the reach of financial products to consumers, including consumers with limited access to conventional bank accounts. The OCC had closed its formal comment period in January, but now says it’s taking comments on the new supplement to its licensing manual until April 14. And the opinions are indeed rolling in, some negative.

The latest broadside came March 15, when the New York State Department of Financial Services issued a statement saying financial-services superintendent Maria T. Vullo “continues to oppose” the proposed charter. The DFS, a powerful presence in financial regulation because of the many banks and financial firms headquartered in New York City, earlier had called the charter idea “highly problematic.” The Conference of State Bank Supervisors, a national group of state regulators, also is on record against the charter.

“The imposition of an entirely new federal regulatory scheme on an already fully functional and deeply-rooted state regulatory landscape 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 DFS said in the new statement.

The DFS also disputes what it says is the OCC’s claim that it has authority to create the new charter without Congressional authorization. “Nonbank financial institutions are not national banks, nor are they similar to the entities encompassed by the National Bank Act,” the statement says. “Even if the OCC had jurisdiction, a new charter would not be needed because there are already effective state regulators in place in all 50 states.”

Some payments-related trade groups, including the Electronic Transactions Association and the Chamber of Digital Commerce, have expressed qualified support for the charter idea, as has the American Bankers Association. The Independent Community Bankers of America, the small-bank trade group, says it has “grave concerns” about the charter.

Earlier this month, Congressional Republicans led by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, sent a letter to Comptroller of the Currency Thomas J. Curry urging the OCC not to rush with the charter idea, according to Bloomberg. Some Democrats on Capitol Hill also have expressed objections. Curry, an appointee of former President Barack Obama, is expected to remain in office until Congress confirms his replacement.

The OCC said in a statement that its new supplement with guidance about the fintech charter “builds upon nearly two years of work related to responsible innovation at the agency,” and also reflects its “careful consideration” of comments received after Curry floated the charter idea.

“The agency typically does not solicit comments on procedural manuals and supplements; however, consistent with its guiding principles of transparency and fostering open dialogue with stakeholders, the OCC will accept comments on this document through close of business April 14,” the OCC said.

Comments can be submitted to specialpurposecharter@occ.treas.gov.