OCC’s Attempts to Create National Regulations for Fintech Meet Continued Opposition

Recent comments from acting Comptroller of the Currency Brian Brooks regarding a “payments charter 1.0” did not go unnoticed by the financial services community.

During a recent podcast interview, Brooks said that the Office of the Comptroller of the Currency (OCC) is planning to roll out the first version of a nonbank payments charter, which he called a “national version of a state money transmission license,” sometime soon.

A group of trade associations representing banks and credit unions wrote a letter to Brooks last week expressing their concerns about such a charter and asking that the OCC “undertake an open and transparent process before considering this new charter.”

The letter advocates for partnerships between traditional financial institutions and fintech companies to deliver new services that help better meet consumers’ needs. It warns that those innovative services must be delivered in ways that protect consumers. The group argues that a nonbank payments charter might introduce risk and that oversight of new entities needs to be consistent with that of other financial services companies.

“Specifically, we encourage the OCC to continue to proceed carefully, deliberately, and transparently as it has throughout its deliberations on new charters. The issues being considered have broad implications for the banking system and longstanding policy determinations. Any change being contemplated should be subject to robust public comment well before considering a new charter,” it says.

In the letter, the group maintains that it hasn’t yet received clarity around concerns it raised in response to a special purpose national bank charter the agency proposed in 2016.  

The Conference of State Bank Supervisors, which represents state regulators, also recently released a statement from its president and CEO, John W. Ryan. The statement expresses support for the New York State Department of Financial Services (DFS) in its ongoing lawsuit against the OCC seeking to block that charter. That suit is currently on appeal following a final judgment from a New York federal district court in favor of the DFS last October.

CSBS said it filed an amicus brief supporting New York’s position that the OCC does not have the authority to grant charters to companies that do not take deposits.

“State regulators will fight any effort to preempt state laws that protect consumers and ensure a safe and sound financial system,” Ryan said.

As PaymentFacilitator has previously noted, fintech companies – including some PFs – have expressed support for some type of national regulatory system to reduce the complexity of adhering to a patchwork of state regulations around payments.

Against this backdrop, fintech companies are pushing ahead with alternative ways to expand the financial services they provide. Mobile banking provider Varo recently announced that it has been granted its own national bank charter. Square announced this spring that it has received the go-ahead to create a bank to offer small business loans and take deposits using an industrial loan company (ILC) charter.