OCC will take fintech charters

The Office of the Comptroller of the Currency will accept applications for bank charters from fintech companies, effective immediately.

The OCC characterized the decision as “consistent with bi-partisan government efforts at federal and state levels” to promote economic opportunity and support innovation that improves financial services. The decision was documented in a policy statement and a supplement to the OCC’s Licensing Manual, both published today.

Joseph Otting

“Over the past 150 years banks and the federal banking system have been the source of tremendous innovation that has improved banking services and made them more accessible to millions,” said Comptroller Joseph Otting. “The federal banking system must continue to evolve and embrace innovation to meet the changing customer needs and serve as a source of strength for the nation’s economy.”

The OCC initially floated the idea of a fintech charter in 2016, a move met with criticism from state regulators and some small-bank advocates. “We feel that the OCC’s proposed action ignores Congress, it seeks to preempt state consumer protection laws, [and] it harms market innovations and puts taxpayers at risk of fintech failures,” said Albert Forkner, then-chair of the Conference of State Bank Supervisors, in a 2017 interview. Forkner is State Banking Commissioner of the Wyoming Division of Banking.

CSBS filed a lawsuit against the OCC over the charter in April 2017 which was dismissed by a judge because the organization’s claim of harm was speculative, since the charter wasn’t yet in existence.

The OCC emphasized in its announcement that the new charter is “only one option among many,” including those from state regulators. Additionally, the agency stressed that:

  • Every application will be evaluated on its unique facts and circumstances.
  • Fintech companies that apply and qualify for, and receive, special purpose national bank charters will be supervised like similarly situated national banks, including having contingency plans to deal with financial stress that threatens their viability.
  • The expectations for promoting financial inclusion will depend on the company’s business model and the types of planned products, services, and activities.
  • New fintech companies that become special purpose national banks will be subject to heightened supervision initially, similar to other de novo banks

The agency has adequate authority, expertise, processes, procedures and resources necessary to supervise fintech companies that become national banks, the OCC said, and to unwind a fintech company that becomes a national bank in the event that it fails.

“The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses and creates greater opportunity for companies that want to provide banking services in America,” Otting said. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank.”

The announcement comes on the heels of a report on financial innovation issued by the U.S. Treasury in which it endorsed the OCC’s fintech charter option.

Not all banking industry advocates criticized the launch of the charter. “On the heels of the Treasury report, we are pleased to see the Office of the Comptroller of the Currency moving forward with their new fintech charter that maintains the strict safety and soundness requirements all banks face today,” said Rob Nichols, president of the American Bankers Association.  “Today’s OCC announcement supports a dynamic banking industry where all players must meet the same high standards.”

Editor’s Note: This story has been updated with comments from the American Bankers Association and notation that the U.S. Treasury endorsed the fintech charter earlier today.