August 24, 2020

OCC responds to NAFCU, trades on payments charter

moneyActing Comptroller of the Currency Brian Brooks last week responded to the letter sent by NAFCU and other financial services industry trades that outlined concerns with the Office of the Comptroller of the Currency's (OCC) plan to establish a narrow-purpose payments charter. The trades warned that such a charter could introduce risks to the financial system and undermine consumers' trust in their financial institution.

While the OCC has not formally introduced this charter, Brooks previously indicated the agency this fall would unveil a charter that would, in its first iteration, create a "national version of a state money transmission license" and offer nonbank payment providers "a national platform with preemption."

In response to the trades' concerns, Brooks said the OCC will proceed "in a manner that is transparent, deliberate, measured, and consistent with the laws and regulations governing the federal banking system." He added that the OCC intends to use the chartering process to ensure fintech companies that perform activities similar to traditional financial institutions "receive the same level of oversight" when it comes to regulation and supervision.

Separately, NAFCU sent its own letter sharing the association's and credit union's concerns about creating specialized charters. NAFCU Senior Counsel for Research and Policy Andrew Morris encouraged the OCC to direct its efforts toward modernizing traditional supervisory frameworks, rather than "give preference to fintech as a new model of banking ready to replace traditional institutions."

By prioritizing this approach, Morris said it will "ensure that the promise of better, more efficient service or expanded access to credit is predicated on responsible innovation rather than regulatory arbitrage."

NAFCU acknowledges the benefits of fintech and innovation in financial services, and last year released a 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.