A new study released by researchers at the University of Texas found financial technology (fintech) company lenders participating in the recent Paycheck Protection Program (PPP) had a higher rate of questionable or misreported loans.
Richard Hunt, president and CEO of the Consumer Bankers Association (CBA), said this study shows that fintechs need to be held to the same compliance standards as traditional banks.
“This study reinforces the immediate need for policymakers to ensure all market participants, including fintechs, are held to the same broad oversight requirements as traditional banks. As CBA and many others have repeatedly warned, failure to act threatens the safety and soundness of the financial system and the high level of protection consumers deserve,” Hunt said.
At CBA’s annual meeting, CBA LIVE 2021, Michael Hsu, acting U.S. Comptroller of the Currency, discussed the need for regulators to work together in providing a level playing field for all market participants.
“Level playing field is very important. No one agency can level the playing field, so we can do our part for the things we control. What it really requires is coordination across the agencies. […] The idea is that we need to do this together, so we’re not getting picked off […] by (market participants) who want to find the path of least resistance to a particular product,” HSU said.
The University of Texas study comes just weeks after The Bank for International Settlements warned of the risk to the global financial system posed by the lack of sufficient regulation and supervision among fintechs. Also, the Department of Justice found last October that 75 percent of approved PPP loans connected to fraud were from fintech lenders.
“Regulators must ensure the same level of consumer protections to new market participants as well-regulated and well-supervised banks. Failure to do so will harm America’s financial system and the consumers we are all working to serve,” Hunt said.