The Office of the Comptroller of the Currency lacks the legal authority or experience to regulate nonbank financial technology companies via its proposed national charters, New York’s top banking regulator told an audience in Washington Jan. 18.
“One should not respond to innovation and new risks by lack of authority, inexperience and lack of details. Certainly not now, this week, when these realities are poignant,” Department of Financial Services Superintendent Maria Vullo said in remarks prepared for delivery at the Exchequer Club.
Vullo added her voice to the abundant criticism of and carping about the OCC charter proposal that has come from other state regulators, members of Congress, regulated institutions and consumer and civil rights groups.
The OCC unveiled its charter proposal Dec. 2 as part of its “responsible innovation” undertaking to grapple with the technological changes that have disrupted lending, payments and other financial services. The charters would be bank charters, but they could be issued to companies that aren’t conventional banks, as long as they are making loans, processing payments or engaging in other banking activities. The OCC took comments on its plan through Jan. 17.
In her comment letter, Vullo made many of the points repeated in her speech, including the claim that national charters could produce a “race to the bottom” that would weaken consumer protection provisions. She said a national charter could empower the big companies that can undertake the task of obtaining one and squeeze out smaller competitors. And she harkened back to the financial crisis as a lesson in the risks of national regulation.
The Conference of State Bank Supervisors, a national organization comprising Vullo and her counterparts, made several of the same points in its comment letter.
In other comments and letters to the OCC:
Financial Innovation Now, a consortium of Amazon, Apple, Google, Intuit and PayPal, gave a vote of confidence to the OCC for its charter proposal.
“The OCC has long telegraphed its exploration of this topic,” Cliff Stanford, head of the bank regulatory group at Alston & Bird LLP in Atlanta, told Bloomberg BNA. “But the OCC’s proposal, put out for comment, clearly focuses everyone’s attention.”
Applying for a charter is optional. The OCC has indicated that an applicant for a charter will have to meet many of the requirements that apply to banks, which should address some of the banks’ concerns about equal treatment, Stanford said. “This is not a charter for everyone,” he said.
For established, profitable operators in online platform lending, for example, the cost and difficulty involved may be balanced by the benefits of preemption of state lending laws, the ability to export home-state interest rates and the OCC’s seal of approval for fintechs seeking to partner with conventional banks, Stanford said.
To contact the reporter on this story: Gregory Roberts in Washington at gRoberts@bna.com
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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