The Office of the Comptroller of the Currency (OCC) released its draft licensing manual for fintech firms seeking the agency's new limited-purpose national bank charters. The draft offers detail on how the OCC will apply the licensing standards and requirements in existing regulations and policies to fintech firms applying for special national bank charters. The draft will be open for comment until April 14, 2017.
In January, more than 250 organizations, including the Center for Responsible Lending (CRL), sent a letter to Comptroller of the Currency Thomas J. Curry urging him not to grant national charters to financial technology firms, which could preempt state oversight and state consumer protection laws that protect consumers and small businesses from abusive financial practices.
CRL Policy Counsel Courtney Robinson released the following statement:
The OCC's plan to grant federal charter to fintech companies will undermine the responsible regulatory framework that it purports to advance and do harm to consumers. A federal non-bank special purpose charter for fintechs will undoubtedly weaken state-level consumer safety measures, and it is far from clear that the OCC has the legal authority to grant a charter to non-depository institutions absent Congressional authorization.
The agency's past aggressive preemption of state laws has been a significant factor in contributing to national consumer abuses. We've seen these kinds of consequences across the industry, including mortgage lending, credit card lending, and bank overdrafts. A special purpose non-bank charter will enable preemption of state oversight and authority, and it will surely serve as vehicle for unaffordable loans.
Additionally, the OCC doesn't have authority to charter non-deposit-taking institutions absent Congressional action. The agency continues to assert its authority to charter non-depositories by referring to its own regulations instead of case law and statutes. This is against the spirit of the National Bank Act, and the courts and Congress have made it clear that the OCC cannot do this. Further, we continue to see the OCC push its practice of issuing series of white papers and guides instead of appropriately conducting Notice and Comment Rulemaking.
Innovation should not come at the expense of consumer protection, just as it did in the subprime mortgage market under OCC's watch. The OCC's intention to move forward with its plan will do just that and put more people in harm's way.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at email@example.com.