July 30, 2020

NAFCU, trades urge proper oversight as OCC explores payments charter

Capitol HillIn response to the Office of the Comptroller of the Currency's (OCC) plan to establish a narrow-purpose payments charter, NAFCU joined with several other financial services industry trades to caution the agency against introducing risks to the financial system or undermining consumers' trust in their financial institution.

While the OCC has not formally introduced this charter, Acting Comptroller Brian Brooks recently indicated the agency this fall would unveil a charter that would essentially create a "national version of a state money transmission license" and offer nonbank payment providers "a national platform with preemption."

In a letter to Brooks Wednesday, NAFCU and the trades acknowledged that "innovations in financial services have tremendous potential to benefit customers as they have throughout the history of banking. Innovation can promote financial inclusion, make it possible to extend credit to many more borrowers, and give customers improved transparency into the financial products they use every day."

However, "the benefits of financial innovation are only realized when they are delivered responsibly, in a way that does right by customers. This means getting regulation right is critical."

If the agency is determined to forge ahead, the OCC should ensure an open and transparent process in considering new charters and "be careful not to introduce risks that might undermine [customer trust] or establish asymmetries that would encourage regulatory arbitrage."

The groups cited their comments related to the OCC's fintech charter and reiterated that regulations and oversight of these charters must be consistent with that of traditional banks. In addition, they flagged concerns that some special purpose national bank's holding company might not be considered a bank holding company and, therefore, not be subject to the Federal Reserve's oversight.

Read the full letter here.

NAFCU acknowledges the benefits of fintech and innovation in financial services, and last year released a new whitepaper that charts a path toward regulatory coordination between traditional financial institutions and fintech companies. The association has also closely monitored the OCC's efforts to establish fintech charters, which have faced legal challenges.