Fintech Charter in Limbo With Changing of the Guard at OCC

By Gregory Roberts

The high-profile federal initiative to issue national bank charters to financial technology companies looks to be stuck in neutral with the imminent departure of Comptroller of the Currency Thomas Curry at the behest of the Trump administration.

Whether the fintech charter effort will be revived, possibly after a redesign, will depend on the as-yet-unpublicized views of incoming acting Comptroller Keith Noreika, and whomever Republican President Donald Trump nominates as Curry’s permanent replacement.

Curry, a veteran state bank regulator who was nominated by Democratic President Barack Obama and began his five-year term after Senate confirmation in 2012, will be replaced May 5 by Noreika, head of the financial institutions regulatory practice in the Washington office of Simpson Thacher & Bartlett LLP. Curry’s term expired April 9, and he has continued in office as a holdover.

Curry has been the point man for the proposal by the Office of the Comptroller of the Currency to offer optional national bank charters to financial technology companies that lend money or engage in other banking activities but do not accept deposits, which could include online platform lenders, payment providers and money transmitters. A national charter would preempt the patchwork of state licensing laws those companies now must navigate to operate nationwide.

“The OCC seems to have been moving in a big hurry,” Brian Knight, senior research fellow at the free-market-oriented Mercatus Center at George Mason University, in Virginia, told Bloomberg BNA.

Noreika is likely to be “pushing the ‘pause’ button,” Knight said May 3.

“It would be appropriate for the new administration to get their people in before any charters are issued so they can assess if it’s appropriate, or do they want to make changes,” he said.

Noreika could not be reached for comment.

The initiative is a response to the dramatic impact of emerging technology on financial services. After months of study, the OCC released a fintech charter proposal in December and requested comments on it. In March, the agency put forth a draft supplement to its licensing manual that spelled out the mechanism for accepting charter applications, and took more comments through April 14.

Grinding to a Halt?

The OCC has taken no additional steps on the charter since, and now, with the change in command, it appears the undertaking will be put on hold, at a minimum.

That should please Financial Services Committee Chairman Jeb Hensarling (R-Texas), and 33 other House Republicans who wrote a letter to Curry in March urging him to pump the brakes on the charter and allow his successor to review the initiative before any final decision on it.

The Conference of State Bank Supervisors (CSBS) asked a federal court April 26 to block the OCC from proceeding with its charter proposal, which the state regulators say exceeds the OCC’s legal authority. The charter would override consumer protection laws and other state regulations, the CSBS said.

Sens. Sherrod Brown (D-Ohio), and Jeff Merkley (D-Ore.), wrote Curry in January raising concerns about consumer protection while expressing several other objections to the charter proposal.

Brown, the top Democrat on the Senate Banking Committee, released a statement May 3 attacking the decision to replace Curry, “a strong, independent watchdog for the nation’s biggest banks,” with Noreika, “who has clear conflicts of interest, and lacks any experience in running such an important agency.”

Lawyer for Big Banks

Noreika’s “extensive experience includes advising regional, multinational and other banks on the structuring of their U.S. operations,” and he “has represented large national banks before the U.S. Supreme Court, the U.S. Courts of Appeals and the U.S. District Courts in connection with federal preemption challenges to states’ assertions of regulatory and supervisory authority over the activities of operating subsidiaries,” the Simpson Thacher website says.

He recently worked as lead regulatory lawyer for Ant Financial Services Group, the Chinese company that operates the Alipay mobile payment platform, in its move to acquire MoneyGram International Inc., a money transmission company headquartered in Dallas, the site says.

The shakeup at the OCC was announced by Treasury Secretary Stephen Mnuchin. Trump has not said whom he will nominate as Curry’s permanent successor, although speculation has focused on Joseph Otting, the former CEO of OneWest, a California bank bought in 2009 by Mnuchin.

The OCC supervises large national banks and is the only federal agency that can charter banks. It is part of the Department of the Treasury.

Curry has made it clear that the proposed fintech charter would be a bank charter, and any company receiving a charter would be held to standards for capitalization, governance, business-plan approval and community investment similar to those applied to national banks.

Under Republican colors, any fintech charter might be expected to be “more streamlined, right-sized and less burdensome” than what Curry outlined, Knight said.

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