U.S. Treasury and NY Financial Service Chief Clash Together Over Fintech Banking ChartersAugust 20, 2018
The NY State Department of Financial Services and the U.S. Department of Treasury clashed together after the DFS’s statement of opposition regarding fintech companies. The chief of DFS voiced the department’s opposition over the endorsement of fintech’s regulatory “sandboxes” made by the Treasury.
Those sandboxes are what allow the fintech companies to collect special bank charters. The report of the disagreement between the two departments was based on the statement on the website by DFS superintendent, Maria T. Vullo. She was also the overseer of DFS’s BitLicense regime.
The opposition of NY DFS was announced shortly after the announcement of the Office of the Comptroller of the Currency. The Office was an independent bureau existing in the Department of Treasury. It announced they would take applications for special bank charters from fintech businesses as long as certain requirements are met.
According to OCC, they are given the authority of granting charters for national banks by the National Banking Act. The charters allow the banks to operate, which includes special purpose national banks. OCC officials also argued regarding companies offering banking products and services.
Their argument said these banks should be allowed to send their applications for national bank charters for national scale business banking. This is as long as they meet specific criteria. In a paper in 2016, OCC stated that fintech companies that obtained federal chapter would also be supervised.
It would be the same as with national banks, which means they would also have a regular examination, capital and liquidity standards, and also financial inclusion. However, the state regulators object to this claiming they have the jurisdiction over the lenders, which are not really banks.
With that, the NY DFS filed a lawsuit to challenge the authority of OCC of granting fintech companies engaged in funding special-purpose national bank charters. In Vullo’s statement, she disputes the proposed statement that innovation will thrive only if companies are allowed to dodge consumer protection laws. These are the same laws with the purpose of helping fintech companies by protecting markets as well as minimizing risk for them.
Vullo adds that companies that truly see to foster change, as well as long-term prosperity, are those that recognize the need to create new ideas. These are companies that would protect customers by means of a solid, reliable state regulatory framework. With that, DFS strongly believes that the decision of OCC to begin accepting fintech applications isn’t authorized by the National Bank Act.