My last blog post ((See Rebecca Michael, Money Transmitter Laws and FinTech in the United States, MBELR Online (Apr. 7, 2017), http://mbelr.org/money-transmitter-laws-and-fintech-in-the-u-s/.)) discussed the cumbersome financial regulations for FinTech firms in the United States, specifically as related to money transmitter laws. The nation’s challenging regulatory scheme may induce FinTech firms’ to do business in countries with friendlier regulatory environments like the United Kingdom. In an effort to be more accommodating to FinTech, the U.S. Federal Government is taking some steps to limit the regulatory burdens placed on FinTech firms.
The Office of the Comptroller of the Currency (OCC) has proposed a limited-purpose bank charter for FinTech companies in an effort to remedy the issue of complicated federal and state lending laws. ((Richard S. Garabedian, House Republicans Challenge OCC FinTech Charter, The National Law Review (Mar. 23, 2017), http://www.natlawreview.com/article/house-republicans-challenge-occ-fintech-charter.)) “The OCC took public comment from early December  through mid-January  on its proposed limited-purpose bank charter for FinTech companies – companies like online lenders and payment processors.” ((Id.)) The OCC has promoted the charter, maintaining that this federal and state partnership “will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states.” ((Id.)) Despite this proposal, many members of the Chamber of Digital Commerce do not believe that FinTech services will fit neatly into any category of the “core banking functions,” insinuating that OCC charter may not effectively reduce the barriers of federal and state lending laws. ((See Perianne Boring, You Down with OCC? – FinTech Firms See Promise in Special Bank Charter, Forbes (Jan. 27, 2017), https://www.forbes.com/sites/perianneboring/2017/01/27/you-down-with-occ-fintech-firms-see-promise-in-special-bank-charter/#62b9c45632e1.))
Plans for “No-Action Letters” have also recently been released by the Consumer Financial Protection Bureau. ((Jim Bruene, CFPB Issues New Policy Encouraging FinTech Innovation, Finovate Blog, (Mar. 3, 2016) http://finovate.com/cfpb-issues-new-policy-encourage-fintech-innovation/.)) No-Action letters are designed to give FinTech firms the “green light” regarding a firm’s regulatory compliance. ((Id.)) “The most important feature of the No-Action Letter is that it will include a statement indicating that [CFPB] staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester.” ((Id.)) These letters will typically only be issued in “exceptional circumstances” and still require FinTech firms to comply with information and identity security rules. ((See id.)) While imperfect, the OCC’s limited-purpose bank charger and the CFPB’s No-Action letters may offer a safe haven for FinTech development. There is hope that, over time, these actions may encourage continued and expanding FinTech innovation in the United States.
Latest posts by Rebecca Michael (see all)
- Can the U.S. Improve Its International Competitiveness as a FinTech Hub? - April 7, 2017
- Money Transmitter Laws and FinTech in the United States - April 7, 2017
- Big Law Partners; De-Equitization of Partners - January 22, 2017