OCC and CFPB Request for Legal Clarity on Issuance of Fintech Charters
Brian P. Brooks, the Acting Comptroller of the Currency at OCC, issued a statement endorsing the need for federal charters for fintech companies. The statement was issued on the release of a report from the CFPB taskforce. Mr. Brooks agreed with the conclusion of the report that the nation needs federal charters for fintech companies to effectively, efficiently, and safely serve the financial needs of consumers under a single uniform set of rules. The report also highlights the need for legal certainty about which agency (OCC or CFPB) is authorized to grant charters to fintech companies.
In the statement, Mr. Brooks mentioned that, under the law, OCC grants national charters to companies engaged in lending, payments, or deposit-taking. In its wisdom, Congress, in the Dodd-Frank Act, separated chartering and prudential supervision from consumer protection enforcement, assigning chartering authority to OCC and specific consumer protection enforcement authority to CFPB. According to the report, the Taskforce recommends that Congress either authorize CFPB to issue federal charters or licenses to non-bank fintech companies engaged in payments, remittances, or lending services, or clarify the authority of OCC. By making CFPB the licensing agency, Congress would assure that consumer protection concerns are at the forefront. The report highlights that OCC, which has a long history of evaluating and granting charters, recently took steps to issue charters to such companies engaged in lending and has announced its intent to do the same with money transmitters. These efforts are subject to legal uncertainty because of questions about whether a non-depository institution can engage in “banking” under the National Bank Act.
If Congress elects not to authorize CFPB to issue federal licenses, it should clarify that OCC has that authority. This alternative option would ensure that fintech companies operating nationwide are subject to a single set of laws. Moreover, it is noted that OCC has significant expertise in fintech in general and in these services specifically; thus, OCC may be well-positioned to supervise non-bank fintech companies with multistate operations. Regardless of which agency charters the fintech companies, the agency exercising that authority should pay careful attention to any capital requirements and other unnecessary or excessive regulatory burdens.
Related Links
Keywords: Americas, US, Banking, Fintech, Fintech Charters, Regulatory Capital, CFPB, OCC
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.