OCC Framework for Marketplace Lending, Fintech to Come in Fall

By Gregory Roberts

Sept. 14 — The Office of the Comptroller of the Currency intends to finish a blueprint no later than mid-December outlining how it will deal with marketplace lenders and other financial technology innovators that are transforming banking and financial services, Comptroller Thomas Curry said.

“That work is well under way, and we will complete that framework this fall,” Curry said Sept. 13 at a marketplace lending conference in Washington.

A key question for the OCC is whether it will provide for a national charter for marketplace lenders and other fintech companies, akin to the ones it grants banks. At least one company has approached the agency about such a charter, a high-ranking OCC official has said.

At the conference, Curry specifically declined to discuss details of the progress on the framework or on a resolution to the national-charter question.

“If we at the OCC do decide to grant limited-purpose charters in this area,” he said, “the institutions who receive the charters will be held to the same strict standards of safety, soundness and fairness that other federally chartered institutions must meet.”

‘Disparate Impact' Concerns

Curry emphasized concerns about whether the computerized algorithms that marketplace lenders use to underwrite online loan applications produce unfair outcomes, citing the “disparate impact” principle that federal regulators have applied under the Equal Credit Opportunity Act — which, Curry noted, extends to all lenders, not just banks. And he referred to discussions by “bankers and community groups alike” at an OCC Forum on Responsible Innovation in June of “the impact and value” of the Community Reinvestment Act, which now applies only to banks.

“Some attendees also noted the need to take care not to weaken CRA and other consumer protection laws inadvertently in any effort to extend or modernize them,” Curry said at the conference.

A national charter, if issued, would preempt the charter-holder from many state laws now applying to marketplace lenders. Under current laws, a marketplace lending company must comply with the patchwork of laws in effect in each state in which it operates.

Some in Industry Skeptical

Several industry representatives have publicly expressed skepticism about the value of a national charter.

“To me, it looks like an additional regulator put into the mix that is not necessary at this stage,” Cross River Bank CEO Gilles Gade said at the conference. Cross River, a lead sponsor of the conference, partners with marketplace lenders, an increasingly common arrangement in the industry.

In August 2015, Curry announced his agency would work on developing systems to identify and understand industry trends and innovative approaches, as well as the changing needs of consumers.

He repeated at the conference the guiding principles for the undertaking, which were identified in a white paper released by the OCC in March, and include: supporting responsible ideas; developing a receptive agency culture; building on the OCC's experience and expertise; encouraging innovation that provides fair access to financial services while protecting consumers; promoting safe and sound operations through risk management; urging banks to take innovation into account in their strategic planning; improving discussion of innovation through formal outreach programs; and collaborating with other regulators.

To contact the reporter on this story: Gregory Roberts in Washington at groberts@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

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