With Fintech Charter on Hold, OCC Wants More Dialogue With Firms

By Lydia Beyoud

A proposed national charter for fintech companies remains in limbo while new Comptroller of the Currency Joseph Otting gets up to speed on agency matters, a senior official said Nov. 29.

Otting took over Nov. 27 at the Office of the Comptroller of the Currency (OCC). His views on a bank-like charter for fintech lenders are an enigma to the industry and in Washington policy circles.

A special purpose charter for fintechs “is currently on hold,” but there are other types of charters that might suit certain fintech business models, OCC Chief Innovation Officer Beth Knickerbocker said at the RegTech Enable conference in Washington.

Fintech companies looking to get into the banking space can explore full-service, traditional bank charters requiring deposit insurance, trust charters, or banker’s bank charters granted to entities created by a group of banks.The OCC is facing two court challenges to its fintech charter initiative, which was proposed in 2016 by Otting’s predecessor, Thomas Curry. Both lawsuits say such authority belongs to the states. The New York Department of Financial Services filed suit in the U.S. District Court for the Southern District of New York, and a separate action was brought by the Conference of State Bank Supervisors in the U.S. District Court for the District of Columbia.

The OCC has asked each court to dismiss the lawsuits, though neither court has yet ruled on those requests. Otting’s next steps in deciding whether to finalize the special charter proposal or kill it will likely impact whether the litigation proceeds.

Time to Chat

Knickerbocker invited fintech companies to reach out and share information about their business models. “Now is actually a very good time” to have conversations with regulators, she said.

“We continue to take the position that we need to evolve as a system, and that includes making sure that we’re considering all evolving business models,” she added.

Face time with regulators can also help innovators and technologies understand the highly-regulated banking and financial services industry, and to track “hot spots before you step on them,” Knickerbocker said.

Regulators aren’t taking a fully hands-off approach to technological innovation in the same way they did during the early 1990s with the growth of the internet, she said. “I think there was this approach that: ‘let the innovators innovate, and then the regulators will sit back and watch what’s happening, and step in later when there’s a problem,’ and that can raise a lot of challenges,” she said.

The OCC’s Office of Innovation plans to “very extensively” expand its office hours program in 2018, she said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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