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Public comments are now available from companies, regulators, advocacy groups and individuals weighing in on the Office of the Comptroller of the Currency's licensing manual draft supplement for special purpose national bank charters.
The OCC received only 17 total comments on its March 15 supplement for evaluating bank charter applications from financial technology companies, far from the 120 it received on the broader whitepaper Exploring Special Purpose National Bank Charters for Fintech Companies, which introduced the idea of the OCC granting fintech companies these bank charters back in December 2016.
The latest round of comments largely came from those skeptical about the proposed fintech bank charters—traditional financial institutions, trade groups and regulators seeking more clarity on regulations or outright opposing the proposal.
But the message from the fintech firms that opted to weigh in remains clear: They are in favor of a federal law that unifies supervision to one regulatory body.
"While many states have made admirable efforts to align their regulations with technological innovation, state laws by and large were drafted for a physical branch banking environment that did not envision online delivery of financial services," wrote Robert Lavet, general counsel of San Francisco-based personal finance company Social Finance, or SoFi, in his comments to the OCC.
Lavet adds, "State laws vary on permissible interest rates, origination fees, late fees, payment terms and physical presence requirements. Evaluating and complying with these varying regulatory regimes entails costs that must be passed on to consumers, while certain financial products might not be permissible in every state."
In the 24-page draft manual released in March, one of the requirements the OCC sets forth for fintech charters is the "consideration of whether the applicant will provide fair access to financial services and promote fair treatment of customers consistent with the safe and sound operations of the bank." The draft manual asks applicants to address financial inclusion in their business plan, adding a description of proposed goals, approach, activities and milestones for serving the relevant market and community.
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In his letter to the OCC, SoFi's Lavet takes issue with the financial inclusion requirement. He calls it "vague and undefined," which he says makes "it difficult for fintech companies interested in the SPNB charter to evaluate the costs of fulfilling such a requirement, as well as the impact of such a requirement on its business operations."
In her comments, personal lending company Oportun Inc.'s chief compliance officer Joan Aristei voiced no concerns with the financial inclusion standards. She wrote the guidance on this type of plan will "inform our discussions regarding how we can modify and enhance the efforts we have already undertaken," adding that she "appreciates the OCC's willingness to innovate and look beyond traditional measures of financial inclusion."
Although fintech firms were largely pleased with the OCC's plans, some other players were not on board with what the OCC has proposed for fintech bank charters.
The Independent Community Bankers of America's senior regulatory counsel Christopher Cole and first VP of accounting and capital policy James Kendrick wrote in their comments: "ICBA welcomes a robust discussion on responsible innovation and supports the agency's Office of Innovation that could potentially help those community banks that are interested in partnering with financial technology or 'fintech' companies.' However, ICBA continues to have strong concerns about issuing special purpose national bank (SPNB) charters to fintech companies without spelling out clearly the supervision and regulation that these chartered institutions and their parent companies would be subject to."
New York State Department of Financial Services superintendent Maria Vullo called the OCC's proposal for fintech charters a "hasty and misguided effort." She said that regulation for the financial technology providers is better left to the states, not the OCC.
Vullo claimed that the National Bank Act, which established a national currency and uniform banking system, "authorizes the formation of associations to conduct the 'business of banking,'" but that it "does not broadly authorize the OCC to regulate the entire financial system in this country."
She continued: "In publishing the manual, the OCC … has made clear that it intends to proceed—without authority—to seek to charter nonbank financial institutions and thereby create an uneven playing field for state banking institutions in derogation of state sovereignty."