On Tuesday, the U.S. Department of the Treasury issued its “Nonbank Financials, Fintech, and Innovation” Report, the fourth in a series of reports outlining the Trump administration’s financial regulatory agenda. In the report, Treasury presents a new approach to regulation designed to promote “critical” innovation in fintech. The report outlines four broad areas of focus: (1) adapting regulatory approaches to data sharing, (2) battling “regulatory fragmentation” and directly addressing new business models, (3) updating activity-specific regulations across a range of products and services, and (4) promoting “responsible experimentation.”
In addition to promoting a regulatory “sandbox” that would allow fintech firms to gain approval for new products, Treasury takes aim at several controversial issues that have dogged fintechs in recent years. The report argues that the CFPB’s payday lending rule should be revoked, for example, and urges Congress to pass legislation overturning Madden v. Midland Funding–the 2d Circuit’s 2015 case holding that state law usury laws could apply to purchasers of debt from national banks, even if the interest rate was “valid when made”–and takes aim at the Telephone Consumer Protection Act (TCPA) and other consumer protection laws the report deems outdated. The report also recommends that regulation of credit reporting agencies and credit repair organizations should be more effectively regulated and supervised to protect consumer credit information and educate consumers on improving credit scores.
At practically the same time as Treasury’s report was issued, the Office of the Comptroller of the Currency (OCC) announced that it will begin accepting applications for its long-awaited special-purpose national bank charter. Comptroller Joseph M. Otting announced the move, stating that the charter will “provide more choices to consumers and businesses,” while stressing fintech companies that provide innovative banking services “deserve the opportunity to pursue that business on a national scale, as a federally chartered, regulated bank.”
The special-purpose charter, initially proposed by former Comptroller Thomas Curry in December 2016 and followed by a manual for charter applicants issued in March 2017, promises to provide some regulatory certainty to marketplace lenders and platforms seeking the benefits of federal preemption over state licensing, usury and disclosure rules. While the special-purpose charter comes with significant capital, liquidity, and risk management requirements, the scheme promises uniform supervision by the OCC and clear regulatory structure, which some companies may prefer. When it was originally announced, the proposed charter sparked criticism from state-regulators including the New York Department of Financial Services (DFS) and community banking trade groups, and it is likely any charter application will reignite these debates.
