Significant Opposition to Federal Fintech Charter Appears as OCC Comment Period Closes

As the OCC’s comment period closed Tuesday, regulators, policy experts, consumer and civil rights groups, and members of Congress all expressed opposition to the OCC’s plan to charter fintech firms.

Below is a roundup of some of the groups expressing opposition to the OCC’s plans:

The Conference of State Bank Supervisors:

“A federal charter would stifle innovation, not foster it, and advantage large, established institutions at the expense of new and small ones. No one should have a monopoly on innovation.”

New York Department of Financial Services:

It would be an avenue for larger, more-dominant firms to control the development of technology solutions in the financial services industry. Currently, small businesses can enter the fintech field and explore different technologies. The ability to start and license a business through a state licensing regime is the appropriate way to foster the development of technological enhancements and encourage small businesses.

Pennsylvania Department of Banking and Securities:

“Given the uncertainty surrounding which kinds of companies might become eligible for a special purpose national charter, the OCC’s proposal could invite companies currently licensed by state regulators to seek a national charter. This unintended consequence could effectively preempt and negate many of the most effective consumer protection laws in a number of states, including Pennsylvania.”

Illinois Department of Financial and Professional Regulation:

“Preemption of state anti-predatory lending laws as applied to national banks contributed directly to the concentration of mortgage loans in firms engaged in riskier lending practices… It is imprudent for a single federal agency, without clear and explicit congressional authorization, to risk similar results in the growing non-depository marketplace.”

Illinois Attorney General:

“National charters for fintechs would eviscerate state interest rate limitations that curb the extension of exorbitantly priced credit and check the worst excesses found in the high-cost lending market… state-chartered financial institutions in the states with robust consumer protections will seek to ‘even the playing field’ by weakening or repealing state consumer protection laws.”

Senators Sherrod Brown and Jeff Merkley:

“Offering a new charter to non-bank companies seems at odds with the goals of financial stability, financial inclusion, consumer protection, and separation of banking and commerce that the OCC has upheld under [Comptroller Curry’s] tenure.”

A Coalition of Anti-Predatory Lending Groups:

“The OCC’s action is deeply alarming to all who care about responsible lending and the right and responsibility of states to protect their residents and oversee commerce within their borders… This charter would be disastrous for our states and we call on the OCC to withdraw it immediately.”

A Coalition of Consumer and Business Groups:

“We are deeply skeptical of assurances that it will be possible to maintain the same range of consumer protections as exist in state law under a Federal charter regime. Fundamentally, the primary reason for a lender to seek a federal charter is to avoid state licensing regimes and their accompanying laws and oversight.”

The Independent Community Bankers of America:

“Since the scope of the chartering authority under the National Bank Act is very unclear and since the federal agencies are inconsistent on how they define a “bank” or what constitutes the “business of banking”, ICBA believes the OCC must seek explicit statutory authority from Congress prior to issuing a special purpose fintech national bank charter.”

Over the past week, several news stories have also captured the skepticism of the OCC’s plans: