Brookings Event Elevates Debate on Fintech Innovation, OCC Charter

An event hosted Wednesday by Brookings encouraged debate on emerging Fintech regulation and highlighted the challenges posed by the OCC’s federal fintech charter proposal.

The event, titled “Fintech: How can government promote the good and protect the bad?” began with a keynote from Rep. Patrick McHenry (R-NC). To explain his view on innovation, McHenry spoke about his father’s lawnmowing business, using him as an example of who he hopes will be served by financial innovation. “How do you use technology to reorient government to provide better services for people? It’s not about less or more government.”

During the panel discussion, CSBS Senior Vice President Margaret Liu, emphasized the need to explore the driving force behind fintech policy changes. “I think it’s important to discuss what problem we are trying to solve,” said Liu. “There have been thousands of Fintech startups in the United States over the past several years, and over $30 billion in investments in 2015 alone, all while being supervised under the state system.”

Liu expressed concerns that the OCC Fintech charter was a “solution in search of a problem” that would pick winners and losers and tip the scales of the Fintech space toward the larger, more established firms.

“At the core of the charter proposal is preemption of a vast range of consumer protection laws. This includes state anti-predatory lending laws, state laws governing debt collection, and state laws around processing and handling consumer complaints.”

The event concluded with remarks from Sen. Jeff Merkley (D-OR), who sent a letter earlier this year expressing concerns about the OCC’s Fintech proposal. “I’m approaching this from the angle of how do you pave a highway for innovation, but make sure it has guardrails so that you don’t go off the track too often to the destruction of consumer’s financial lives,” said Merkley. “One of the issues here is whether we create regulatory arbitrage. Also, do we create a concern about the overruling of state consumer protections, including interest rates? These concerns are shared by all state banking regulators and over 250 other organizations.”