The Department of Financial Services (DFS) based in New York has disagreed with the approval of regulations for fintech firms by the U.S Department of Treasury. This is according to a statement by the superintendent and overseer of New York’s DFS, Maria T. Vullo.
The US Office of the Comptroller of the Currency (OCC) stated on Tuesday last week, that it will begin accepting financial technology firms’ applications for a national charter. However, the companies must meet certain demands. This would for the first time, allow fintech companies an opportunity for federal oversight.
Authorized to grant charters
It is this move by the OCC which is an independent bureau at the Department of Treasury that has forced the DFS based in New York to quickly voice its opposition. Meanwhile, the OCC stated that it is authorized by the National Banking Act to give charters permitting National Banks to run banking business. The regulator claimed that its powers include that of National Banks for a special purpose.
Officials of the OCC feel that firms providing banking services or products should be allowed to apply for National Bank charters. Consequently, the said firms would be able to operate their businesses nationally under one license and a single regulatory authority as opposed to applying for licenses at different states.
Two years ago, OCC had revealed that fintech firms that were granted a charter would be supervised in a similar manner to the National Banks. This would consist of capital and liquidity merits, regular tests, financial inclusion expectation, and the contingency plan of mitigating financial stress.
State regulators object
Different state regulators have, however, objected to the move by claiming that they possess jurisdiction over non-bank lenders. The New York DFS even went ahead to file a legal suit. It is questioning the OCC’s power to give fintech firms the national bank charters for a special purpose.
Vullo disagrees with the notion that innovation will only succeed when companies are allowed to avoid consumer protection laws. The same laws that are responsible for safeguarding markets and reduce the risk for the fintech firms as well. She feels that a national fintech charter will only create a federal regulatory system that is unjustified compared to the well-organized state regulatory system.