The OCC Wants Online Lenders to Become Limited Purpose Banks

Earlier today, Comptroller of the Currency Thomas J. Curry announced that the OCC will move forward with chartering financial technology companies that offer bank products and services that meet their high standards and chartering requirements.

“We have decided to move forward and to make available special purpose national charters to fintech companies for a few basic reasons,” he began saying during a speech at the Georgetown University Law Center. “First and foremost, we believe doing so is in the public interest. Fintech companies hold great potential to expand financial inclusion, empower consumers, and help families and businesses take more control of their financial matters.”

Curry also responded to critics who argued that a limited charter would put fully regulated banks at a disadvantage competitively. “The reality today is that the 4,000 fintech companies out there are already competing with national and state banks, without regard to any of the national bank responsibilities and under a patchwork of supervision,” he said. “Granting national charters to the companies who desire and warrant one doesn’t weaken the competitive position of existing banks or the dual banking system. In some ways, it levels the playing field because statutes that by their terms apply to national banks would apply to all special purpose national banks, even uninsured ones.”

Applying for this charter would be optional, not a requirement.

Like the Treasury RFI last year, the OCC has put up an official 13-question Request For Comment that is open until January 15th.

Those questions are:

1. What are the public policy benefits of approving fintech companies to operate under a national bank charter? What are the risks?

2. What elements should the OCC consider in establishing the capital and liquidity requirements for an uninsured special purpose national bank that limits the type of assets it holds?

3. What information should a special purpose national bank provide to the OCC to demonstrate its commitment to financial inclusion to individuals, businesses and communities? For instance, what new or alternative means (e.g., products, services) might a special purpose national bank establish in furtherance of its support for financial inclusion? How could an uninsured special purpose bank that uses innovative methods to develop or deliver financial products or services in a virtual or physical community demonstrate its commitment to financial inclusion?

4. Should the OCC seek a financial inclusion commitment from an uninsured special purpose national bank that would not engage in lending, and if so, how could such a bank demonstrate a commitment to financial inclusion?

5. How could a special purpose national bank that is not engaged in providing banking services to the public support financial inclusion?

6. Should the OCC use its chartering authority as an opportunity to address the gaps in protections afforded individuals versus small business borrowers, and if so, how?

7. What are potential challenges in executing or adapting a fintech business model to meet regulatory expectations, and what specific conditions governing the activities of special purpose national banks should the OCC consider?

8. What actions should the OCC take to ensure special purpose national banks operate in a safe and sound manner and in the public interest?

9. Would a fintech special purpose national bank have any competitive advantages over full service banks the OCC should address? Are there risks to full-service banks from fintech companies that do not have bank charters?

10. Are there particular products or services offered by fintech companies, such as digital currencies, that may require different approaches to supervision to mitigate risk for both the institution and the broader financial system?

11. How can the OCC enhance its coordination and communication with other regulators that have jurisdiction over a proposed special purpose national bank, its parent company, or its activities?

12. Certain risks may be increased in a special purpose national bank because of its concentration in a limited number of business activities. How can the OCC ensure that a special purpose national bank sufficiently mitigates these risks?

13. What additional information, materials, and technical assistance from the OCC would a
prospective fintech applicant find useful in the application process?

Read the full speech here.

Read the OCC’s 17 page report on the matter. The Request For Comment and submission instructions are at the end of it.