The Conference of State Bank Supervisors (CSBS) said it has concerns about a special purpose charter from the Office of the Comptroller of the Currency (OCC) on financial technology firms and that it could potentially threaten the U.S. financial system.
State regulators recognize that financial technology has the potential to improve the financial system’s ability to operate more efficiently and provide access to credit, however, the CSBS said the OCC’s new charter is flawed.
“Today’s announcement represents an historic expansion of the role of the federal government, one that will permeate into the economies in all 50 states and distort the financial system with unwelcome consequences,” said CSBS president and CEO John W. Ryan.
The CSBS is concerned that a federal financial technology charter would destroy the marketplace and institute command-and-control innovation. State regulators are concerned about the OCC’s criteria for awarding charters and its intent to not include the normal regulatory safeguards placed on national banks, such as deposit insurance.
Another concern involves the CSBS’s view that OCC is expanding its mandate without statutory authority. The OCC is establishing its own regulations to go around regulations established in the National Bank Act, the CSBS said. The OCC’s rules establish a non-depository special purpose charter for fintech firms.
The CSBS also said the new charter would put consumers at risk. For example, during the early 2000s, many states adopted laws and brought enforcement actions to stop predatory lending. The OCC’s response was to preempt the application of state anti-predatory lending laws to national banks and their operating subsidiaries. It later required congressional action to reset the balance between state and federal regulation in consumer protection, the CSBS said.