CSBS Submits Comment Letter in Opposition of the OCC’s Proposal to Issue a Special Charter for Fintech Companies

The Conference of State Banking Supervisors (“CSBS”) submitted a comment letter on January 13, 2017, restating its disapproval of the Office of the Comptroller of the Currency’s (“OCC”) proposal to issue a special charter for fintech companies. The CSBS reiterated its beliefs that: (1) the OCC lacks authority to issue such a charter; (2) a charter of this nature will distort the marketplace for financial services; (3) the charter will expose taxpayers to the risk of fintech failure; and (4) the OCC’s proposed “fintech” charter eliminates states’ consumer protection authority.

First, the CSBS argues that the granting of a special purpose nonbank charter has not been expressly authorized by Congress, which is required by the National Bank Act. The Comptroller of the OCC is prohibited from chartering a national bank that does not engage in deposit taking, which is the current fintech company design, unless the charter is for a special purpose bank expressly authorized by the National Bank Act, which includes trust banks, bankers’ banks, and credit card banks. According to the CSBS, any attempt by the OCC to issue a special nonbank charter to a fintech company would be unlawful and invalid because the fintech companies do not fall under one of the expressly authorized special purpose bank categories.

Next, the CSBS opposes the OCC’s plan because it argues that the proposed fintech charter destabilizes banking’s legal and regulatory structure. For example, according to the CSBS, it is unclear whether the fintech special charter companies would be required to be members of the Federal Reserve. Furthermore the CSBS argues that the special purpose fintech charters may be exempt from the OCC’s enforcement authority under federal securities laws. The CSBS is also concerned as to how federal consumer financial laws will apply to special purpose fintech companies.

The CSBS contends that the fintech companies want access to the federal payment system and discount windows, but the special charter would create a hole in oversight. Thus, in the event of a fintech company’s collapse, taxpayers would end up “holding the bag.”

Finally, the CSBS argues that the OCC’s proposed fintech charter eliminates states’ consumer protection authority.