OCC’s Fintech Charter Plan Receives Tepid Reviews

The Office of the Comptroller of the Currency’s plan to offer national charters to financial technology firms drew a range of reactions from the traditional financial industry, running from lukewarm support to staunch opposition.

While the comment period ended Tuesday for the OCC’s white paper that proposed the new charter, the federal regulator hasn’t announced a start date for charter applications. An agency official on Wednesday told Morning Consult that the OCC will accept applications after it has considered comments and published a policy statement, and when agency officials are confident they can effectively supervise applicants.

In their public comments, banks said they don’t want chartered fintech firms to get special treatment while operating in the banking sphere. Rob Morgan, the American Bankers Association vice president of emerging technologies, wrote that any “missteps by a fintech company operating through a national bank charter will inevitably reflect on all banks.”

Trade groups like the Financial Services Roundtable said they want the OCC to monitor the charter’s effects on the industry and refrain from calling chartered fintech firms “banks” if they don’t accept insured deposits. Richard Foster, a senior vice president at FSR and Christopher F. Feeney, president of the group’s fintech division, wrote that fintech rules should encompass consumer protection laws, risk management standards and capital and liquidity requirements — areas that are “consistent with standards applicable to full-service national banks and federal thrifts.”

Smaller banks were more critical in their comments, with the Independent Community Bankers of America saying it could not support the charter plan until the agency clarifies several questions. The OCC’s white paper “raises more questions than it answers,” wrote Christopher Cole, ICBA’s executive vice president and senior regulatory counsel, and James Kendrick, first vice president of accounting and capital policy.

The industry association called for the OCC to issue formal rules on national fintech charters that are subject to a notice and comment period.

Consumer groups also criticized the OCC’s proposal. Consumer Bankers Association Vice President and Senior Counsel Dong Hong wrote that decisions to broaden charter eligibility should be based on “well-developed policy positions that have weighed the risks and rewards to all stakeholders in the banking industry.”

“Unfortunately, we do not believe the white paper meets these standards,” he wrote, adding that the OCC could emulate the approach of the Federal Reserve in its initiative on faster payments, which was a “multi-year effort” that included industry task forces.

State regulators and civil rights groups were even more critical. The Conference of State Bank Supervisors wrote that the new charter would skirt state regulations and allow the government to cull winners and losers in the private sector. A letter from the Center for Responsible Lending that included the NAACP and the Leadership Conference on Civil and Human Rights said the charter plan would subvert state regulations and consumer protection laws.

One group that expressed support for the charter was Financial Innovation Now. The fintech organization advocated for tailored regulations based on risk and business model.