The Office of the Comptroller of the Currency (OCC) has proposed to allow financial technology (fintech) companies to apply for full or special purpose national bank charters. In advance of the proposal's January 15, 2017, comment deadline, OCC Chief Counsel Amy Friend recently addressed concerns about the proposal in edited responses to questions from American Banker.

Highlights of Ms. Friend's comments included:

  • Responding to concerns that the charter will allow fintech companies to avoid rules applicable to conventional banks, Ms. Friend emphasized the OCC's focus on "consumer protection and financial inclusion" and stated that, even in the absence of directly applicable laws, the OCC nevertheless "will determine how to fashion appropriate conditions to hold these [fintech] banks to our high standards and expectations of fair treatment and fair access."

  • Ms. Friend defended the OCC's authority to issue special purpose national bank charters to fintech companies that engage in only one of the three core banking activities of taking deposits, paying checks, or lending money, and also noted the OCC's past use of its authority to find that "traditional activities done using new technology, are bank permissible."

  • Responding to concerns that the chartering process will have few formal requirements, Ms. Friend indicated that the process would not be ad hoc and would follow the national bank chartering process detailed in an updated booklet issued in September 2016. She also stated that the OCC will issue a policy specifically dealing with the evaluation of fintech applications for special purpose national bank charters.

  • Responding to a question asking whether companies such as mortgage lenders, installment lenders, or payday lenders would be eligible for the new charter, she stated that the national bank charter "does not dictate business models" but noted that "the OCC took steps in the early 2000s to eliminate abusive practices common to payday lenders at the time" and "has no intention of allowing these abusive practices to return." She also commented that "major payday lending" that exists today is conducted "through state-licensed lenders" and that while the Comptroller has encouraged banks to meet customer needs for small-dollar, short-term credit, banks "must do so with heightened risk management to protect against the abuses and risks the agency identified."

  • Ms. Friend indicated that a charter could potentially be granted to a fintech company before Comptroller Thomas J. Curry's term expires in April 2017 but deferred to the Federal Reserve as to whether a fintech national bank would be able to access the Federal Reserve's discount window, commenting that the OCC will "work closely" with the other federal banking agencies.

On January 24, 2017, from 12 p.m. to 1 p.m. ET, Ballard Spahr will conduct a webinar on the OCC's proposal. A link to register is available here.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance. Attorneys in our Marketplace Lending Task Force represent dozens of fintech companies providing loans and financial services to consumers and small businesses directly and through bank partnerships.


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