The Conference of State Banking Supervisors (CSBS) opposes a proposal by the Office of the Comptroller of the Currency (OCC) that would license financial technology and other nonbanks as banks.
In a letter to the OCC, CSBS said a federal charter for financial technology, or fintech, companies will weaken consumer protections by pre-empting effective state laws already on the books. The proposal also exceeds the limit of OCC’s charter, CSBS argues.
“The OCC’s unauthorized expansion of power should not be allowed to move forward because it exceeds its legal authority and makes an end run around Congress,” said John Ryan, president and CEO of the CSBS. “A federal charter would stifle innovation, not foster it, and advantage large, established institutions at the expense of new and small ones. No one should have a monopoly on innovation.”
It would also give the OCC the power to pick winners and losers in the fintech space and expose taxpayers to fintech failures, argues Ryan.
“Fintechs want access to the Fed payments system and discount window, but not strict oversight. In the event of fintech failures, taxpayers would be left holding the bag,” Ryan said.
CSBS officials urge policymakers to oppose the OCC’s ruling.
“The OCC action would preempt important state consumer protection laws,” Ryan added. “The OCC has a history of harming consumers through preemption. In the lead-up to the U.S. financial crisis, the OCC preempted state anti-predatory lending laws for national banks. Congress was forced to step in and limit the OCC’s authority. We shouldn’t repeat the mistakes of the past.”