October 25, 2023

NAFCU offers ways to support financial innovation ahead of hearing

US Capitol buildingAhead of today’s House Financial Services subcommittee hearing on modernizing financial services through innovation and competition, NAFCU Senior Vice President of Government Affairs Greg Mesack outlined several considerations to limit regulatory burdens on credit unions and support a level playing field.

“Consumers today come to expect technological developments from their financial institution—from online banking to mobile bill pay,” Mesack wrote. “Many credit unions embrace innovations in technology to improve relationships with members and offer more convenient and faster access to financial products and services.

“As we have previously cautioned, the growth of fintech can also present new threats and challenges as novel entities emerge in an underregulated environment,” he added.

Mesack wrote in general support of draft legislation, Financial Services Innovation Act of 2023, that would “create a petition process for regulatory flexibility for innovation,” but outlined some asks to strengthen the legislation:

  • clear guidance from regulatory agencies on the petition process to minimize administrative burdens;
  • collaborative forums for credit unions and other financial institutions to share best practices and challenges related to innovative financial products and regulatory petitions;
  • consistency in how regulatory agencies respond to petitions, ensuring a level playing field for credit unions (both amongst the industry and with other types of institutions);
  • clarity and support to navigate state-level regulatory challenges and engage effectively with the judicial review and arbitration processes to ensure the petition process can effectively work; and
  • protection against the potential for misuse by fintechs, resulting in competitive pressure for regulated entities. It is important that petitioners have strong regulatory compliance track records.

Today’s hearing is set to begin at 10 a.m. Eastern. NAFCU will continue to advocate for a regulatory environment that allows credit unions to innovate to meet members’ needs and compete on a level playing field.