Curry defends OCC plans to license fintechs

Thomas Curry

Comptroller of the currency Thomas Curry has defended his bureau’s move to license certain technology companies as they begin to offer banking products and services, after the plan was criticized by industry groups and a fellow regulator.

Curry announced in December that the Office of the Comptroller of the Currency (OCC) would move forward with considering applications from financial technology (fintech) firms to become special purpose national banks (SPNBs). The OCC published a paper discussing the issues and conditions the agency will consider in granting charters to such organizations, and asked for feedback.

That feedback has not been universally positive. In a January 17 comment letter, the Clearing House Association, Independent Community Bankers of America and Securities Industry and Financial Markets Association wrote: ‘There are multiple fundamental policy and other issues that need to be considered and resolved before SPNB charters can be issued to fintech companies.’

Among other things, the groups pointed to the nature and extent of regulation and supervision of such institutions, the factors supporting issuance of a particular charter, the views of other agencies, financial inclusion and consumer protection, safety and soundness – as well as competitive equality (CorporateSecretary.com, 2/1).

The OCC must establish a ‘fair and level competitive playing field to address the concern that fintech SPNBs would be able to offer services and products in direct competition with full-service banks, but subject to a more limited and less burdensome regulatory regime,’ the groups said.

Separately, the New York State Department of Financial Services superintendent Maria Vullo argued: ‘The OCC should not use technological advances as an excuse to attempt to usurp state laws that already regulate fintech activities where they intersect with banking and lending, whether depository or non-depository.’

She added that ‘[a] one-size-fits-all federal charter will not work to create a level playing field among all financial services companies, or to alleviate risks. On the contrary, the proposal increases risk, creates an opportunity for regulatory arbitrage and attacks states sovereignty.’


RESPONSE
Curry responded to some of these concerns in a speech earlier this week. He noted that questions had been raised about whether the OCC has the authority to grant charters to such companies and the experience to supervise them.

‘To be clear, the National Bank Act does give the OCC the legal authority to grant national bank charters to companies engaged in the business of banking,’ he said in remarks at the LendIt USA 2017 conference in New York. ‘That authority includes granting charters to companies that limit their business models to certain aspects of banking, and it is not circumscribed just because a company delivers banking services in new ways with innovative technology. Neither does the law require that a bank take deposits to qualify for a national bank charter.’

The OCC has been issuing national charters to banks with limited purposes for decades, both insured and uninsured, he added.

Curry also stated that his office already supervises banks and service providers that ‘push the limits of technology to serve customers better.’ The OCC has experienced examiners who specialize in banking technology and have expert knowledge of payment systems, credit and consumer protection, and who know where companies can face pitfalls, he said.  

A second misperception, according to Curry, is that receiving a national bank charter is a ‘ticket to light-touch supervision’. In fact, he said, national banks get regular on-site supervision by ‘trained, highly professional examiners who assess whether the company is operating in a safe and sound manner and complying with laws that protect the consumer and make the system safer for everyone.’

Laws that apply uniquely to national banks would also apply to a newly chartered fintech that becomes a national bank, he said, adding that consumer protection has been boosted since the financial crisis through the Consumer Financial Protection Act and the creation of the Consumer Financial Protection Bureau.

‘Federal pre-emption has also changed as a result of the Dodd-Frank Act, which clarified the scope of the OCC’s application of federal pre-emption for national banks,’ Curry told attendees. ‘As a result, state laws that address anti-discrimination, fair lending, debt collection, taxation, zoning, crime and torts generally apply to national banks and will also apply to fintech companies that become national banks.’

Another misperception is the idea that offering federal charters to fintech companies mixes banking and commerce, according to Curry, who insisted that the OCC ‘understands the importance of maintaining the long-standing separation of banking and commerce. Proposals that would mix banking and commerce are inconsistent with the OCC’s chartering standards and would not be approved.’