Congress—and not the OCC—should decide whether fintech firms should be eligible for charters as special-purpose banks, two Democratic senators said Monday.
In a letter to Comptroller of the Currency Thomas Curry, Sens. Sherrod Brown (D-OH) and Jeff Merkley (D-OR) effectively said that the agency should abandon its already announced plans to design standards that would lead to charters. Brown is the ranking Democrat on the Senate Banking Committee, which has jurisdiction over the OCC.
“It is up to Congress to take action on these important matters, and while it does we would encourage the OCC to devote its resources to collaborating with other federal and state regulators to aid innovative financial services providers in navigating the current landscape of laws,” the senators said.
Curry announced the OCC’s plan in a speech last month, saying that chartered companies would be required to meet the same standards as national banks. The OCC is soliciting comments on what the standards should entail and has set a Jan. 15 for submissions.
In addition, the agency issued a white paper detailing why the OCC believes such charters are needed. In the white paper, the OCC said that to be chartered a fintech firm would be required to have a governance structure commensurate with the risk and complexity of its services. And it is expected to have a culture of compliance that emphasizes the need to operate within federal regulations.
The senators urged the OCC to hold back, saying that the agency’s plan could upset the current financial regulatory structure.
“Offering a new charter to non-bank companies seems at odds with the goals of financial stability, financial inclusion, consumer protection, and separation of banking and commerce that the OCC has upheld under your tenure,” they said.
In addition, they said the OCC’s proposal is not sufficiently specific and could allow other non-banks institutions to seek a charter.
“Congress has given the OCC a very narrowly-defined authority to charter only three specific types of special-purpose national banks (bankers’ banks, credit card banks, and trust banks) that do not accept deposits,” the senators said. The new charter authorization could lead to “charter shopping” in an effort to evade strict state and federal laws.
The new charters could allow companies to evade consumer protection laws and encourage the proliferation of predatory lenders, they said.
Several consumer groups also have voiced their opposition to the OCC plans.
