U.S. bank regulator allows fintech firms to seek federal charter
A U.S. bank regulator said on Tuesday it would start accepting national charter applications from financial technology companies, giving so-called fintech firms a path to federal oversight for the first time.
The move by the U.S. Office of the Comptroller of the Currency opens the door for online and peer-to-peer lenders to operate nationwide under a single licensing and regulatory regime instead of a patchwork of state licenses, and came hours after the Treasury Department endorsed the approach.
Effective immediately, the OCC will accept applications from non-depository fintech companies for a special purpose national bank charter.
The regulator said successful applicants would be supervised similarly to comparable banks, and companies must provide a contingency plan for how they would navigate financial stress that could threaten their operations.
Some online lenders have complained that applying for licenses on a state-by-state basis is onerous.
"If they can create a national standard of sorts and harmonize that regulatory burden then that will provide a real benefit to America’s small businesses and hopefully in the long run decrease of the cost of credit,” said Scott Stewart, chief executive of trade group Innovative Lending Platform Association which represents online lenders like OnDeck Capital Inc
A fintech charter was first floated by the OCC in 2016. State regulators have vigorously opposed the idea, saying it exceeds the OCC`s statutory authority.
The New York Department of Financial Services and the Conference of State Bank Supervisors unsuccessfully sued the OCC last year to block the charter.
In a statement, the New York regulator said the OCC decision will impose an "unjustified" federal regulatory scheme on the state regulatory landscape.
The CSBS did not rule out further litigation. “On behalf of the citizens to whom we are accountable, state regulators are keeping all options open to stop this regulatory overreach," the group said in a statement.
The Independent Community Bankers of America has also raised concerns, saying such a charter may allow fintech firms to circumvent tough banking rules.
In a report released earlier on Tuesday, the Treasury recommended the charter as a way to improve the U.S. regulatory landscape to support non-bank financial institutions and foster technology-driven innovation.
But the Treasury recommended against allowing fintech firms to collect government-insured deposits under such a charter.
The OCC will only accept applications from nondepository firms. This limitation, which aims to reduce risks to taxpayers, could undermine the use of a charter for some fintech firms, according to industry insiders.
Tuesday`s report was the last of four by the Treasury as part of a review of financial rules mandated by an executive order from U.S. President Donald Trump in February.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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