While the CFPB has not yet held a public event devoted to FinTech or financial innovation, the Office of the Comptroller of the Currency (OCC) recently held a Forum On Supporting Financial Innovation in the Federal Banking System to discuss the agency’s approach to FinTech and other innovative products. The forum follows up on the OCC’s white paper with a similar name.
The all-day forum included a keynote address by the Comptroller of the Currency, Thomas J. Curry, and a series of panel discussions involving representatives from the OCC, large and small banks, a marketplace lender, consumer advocates, and various consultants.
We believe there are three key takeaways from the event.
First, the OCC seems to recognize that many consumers and small businesses have difficulty obtaining credit, and that efforts to protect borrowers through regulation can actually harm borrowers by reducing credit availability. This appears to be one reason why the OCC wants to encourage financial innovations. It also sees FinTech as an opportunity to improve the speed and accuracy of transactions, as well as the integrity of records. Mr. Curry stated that he would like FinTech firms to feel comfortable engaging with the OCC about their new financial technologies, given the OCC’s expertise in the field.
Second, what the OCC supports is “responsible” innovation. Multiple OCC representatives in their remarks stated that the OCC has “made a commitment” to supporting innovation, but every one of them simultaneously made clear that the agency will not “relinquish its responsibilities” or “abandon its core principles” in doing so. OCC representatives indicated that while the OCC would encourage pilot programs, for example, it is wary of providing safe harbors for such programs due to the potential for consumer harm. (We note that the OCC’s reluctance to provide safe harbors dovetails with the CFPB’s policy of providing only limited “no-action” letters, which are largely toothless: they can be modified or withdrawn by the CFPB at any time, are not binding on the CFPB in the future, and provide no immunity against private litigation or enforcement actions by other state and federal agencies.) It remains to be seen where the balance will be struck between attempting to protect borrowers and supporting new technologies and business methods that expand the availability of credit and improve the customer experience.
Finally, we noted some comments of concern regarding national bank charters and the possibility of creating a new type of charter for FinTech companies. Multiple speakers emphasized the “sanctity of the charter” and related agency expectations, expressing disapproval of banks acting as “rent-a-charters,” “booking agents,” or “flow-throughs,” which “have to stop.” If a new type of charter is created for FinTech companies, which seems unlikely, the OCC appears intent on making sure that there is nothing “light” about the regulatory expectations that would accompany such charters.