The Office of the Comptroller of the Currency announced, in a highly anticipated decision, that it would begin to consider special-purpose charter applications from fintech entities. This move, which has been the subject of months of industry speculation, came mere hours after the Department of the Treasury endorsed a national charter for fintech companies. This development will allow fintech firms to opt in to a national regulatory scheme rather than the current state law regulation in this market sector.
The OCC’s decision was the subject of a great deal of resistance from state regulators while it was under consideration, and the decision was criticized heavily by state regulators immediately following Tuesday’s announcement. Regulators from New York and California, in particular, described the move as a “regulatory train wreck in the making” and “not authorized under the National Bank Act.”
The OCC’s decision, however, appears focused upon increasing marketplace innovation and inclusivity. Commissioner Joseph Otting released a statement applauding the potential for increased consumer choice, adding that “Providing a path for Fintech companies to become national banks can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation and competition.” The Bureau of Consumer Financial Protection’s (BCFP) acting director Mick Mulvaney also issued unprecedented comments on the decision. Mulvaney stated “We welcome the important steps taken by our fellow agencies to promote innovation. Success will be determined by how well U.S. regulators coordinate their efforts. We look forward to working with our State and Federal partners to ensure American global leadership in the Fintech space for years to come.”
Observers believe that chartering qualified fintech companies as national banks will also have significant public policy benefits. The national bank charter provides a framework of uniform standards and supervision; applying this framework to qualified fintech companies may level the playing field with regulated institutions. In addition, applying the OCC’s uniform supervision over national banks, including fintech companies, will assist in promoting consistency in the application of laws and regulations across the country and in promoting the fair treatment of consumers.
While this is a significant development, it will require fintech companies to carefully consider whether they can meet the application requirements, as well as consider what institutional changes they may need to accomplish to comply with OCC supervision. Under the strict parameters set forth by the OCC, fintech companies have significant decisions ahead regarding whether to seek this special-purpose charter. As government at all levels becomes more active in the fintech space, fintech companies need to consider how and when they engage with all levels of government to ensure that their business is understood and their interests protected.
