As fintech companies apply to become a national bank without offering deposit accounts or leverage state laws to acquire a special purpose charter – serving as an entry point for a national charter – they may receive comparatively less oversight when compared to credit unions and other national banks. If approved, fintech banks could receive the benefits of national preemption and could apply for master account access at the Federal Reserve, potentially without the same capital and liquidity requirements credit unions and traditional banks must follow to maintain safety and soundness. This approach puts credit unions at a competitive disadvantage, and could put the national financial system, consumers, and taxpayers at risk.
[VIDEO] The Risks of Unregulated Fintech Banks
In the association's advocacy, NAFCU consistently shares with lawmakers, regulators, and the public its concerns about the risks unregulated entities could bring to the financial system and recommends ways to ensure transparent rulemaking and chartering processes and fair regulatory oversight. NAFCU President and CEO Dan Berger, Executive Vice President of Government Affairs and General Counsel Carrie Hunt, and Vice President of Legislative Affairs Brad Thaler recently pushed a coordinated message to the CFPB, Office of the Comptroller of the Currency, and Congress on ways they can address these issues.
As more fintech companies take advantage of different strategies to sidestep financial regulation and enter the financial system as banks, NAFCU is leading efforts with regulators and lawmakers to ensure fintech companies are operating on a level playing field with credit unions. NAFCU has developed a Legislative and Regulatory Fintech Principles brief that outlines principles to support our leading advocacy efforts on the issue. Download NAFCU’s Legislative and Regulatory Fintech Principles