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OCC Will Begin Issuing National Charters for Fintech Firms

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The Office of the Comptroller of the Currency will move forward with its plan to begin issuing special purpose national bank charters to fintech firms that provide services similar to traditional banks, Comptroller Thomas Curry announced in remarks at the Georgetown University Law Center.

An August white paper from Financial Innovation Now noted that fintech firms that offer banking services face a patchwork of regulations for each state that they operate in. Many partner with traditional banks in order to avoid that patchwork. Issuing special purpose national bank charters to fintech firms that engage in fiduciary activities or that receive deposits, pay checks or lend money would allow them to operate nationwide without affiliating with another institution, according to the OCC.

Special purpose charters are already in use by some financial institutions, primarily trust and credit card banks, according to the OCC. Operating under such a charter means fintech firms would be subject to the corporate organization and structure provisions of the National Bank Act.

Importantly, the OCC wrote in a white paper published in December that it sees the National Bank Act as “sufficiently adaptable to permit national banks – full-service or special purpose – to engage in new activities as part of the business of banking or to engage in traditional activities in new ways.” The agency would consider those new activities on a case-by-case basis.

Fintech firms approved for a special purpose national bank charter would also be subject to the Bank Secrecy Act, anti-money laundering laws and economic sanctions issued by the Treasury Department’s Office of Foreign Assets Control. They would also generally be subject to prohibitions against deceptive, abusive or unfair practices under the Federal Trade Commission Act and the Dodd-Frank Act.

State laws regarding anti-discrimination, fair lending, debt collection, taxation, zoning, criminal laws, and torts would still generally apply to fintech firms with a special purpose bank charter.

The OCC is working on a formal policy for evaluating fintech firms’ applications for the charters, and is currently accepting public comments on the December white paper, which can be found here. The comment period ends Jan. 15, 2017; comments should be sent to [email protected].

Curry said in prepared remarks that issuing special purpose bank charters to fintech companies “is in the public interest. It is clear that fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.”

Curry noted in his remarks that there are over 4,000 fintech firms operating in the United States and United Kingdom, and worldwide investment in the fintech sector has grown to $24 billion over the last five years.

His office is working to ensure “all institutions with federal charters have a regulatory framework that is receptive to responsible innovation along with the supervision that supports it.”

Fintech firms will not be required to obtain the charter. “Merely making a charter available does not create a requirement to seek one,” Curry said in his remarks. “Nor does it displace the other choices a fintech company may have — for example, seeking a state bank charter in a state that makes one available or to continue operating outside the banking system.”

The OCC established an Office of Innovation in October that will serve as the “central point of contact and clearinghouse for requests and information related to innovation.” It is currently led by acting Chief Innovation Officer Beth Knickerbocker and is expected to be fully operational in the first quarter of 2017.

— Read Fintech Leaders Cautious as Online Lender Regulations Loom on ThinkAdvisor.


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