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OCC Special Interest Charter Draws Responses From ABA and ICBA

April 17 – The two major banking trade groups have weighed in with feedback to the Office of the Comptroller of the Currency on the issue of the proposed special-purpose charter for unregulated financial technology companies. The OCC published a draft supplement in March to its original whitepaper of December 2016, and accepted comments through April 14.

In a comment letter from the Independent Community Bankers of America dated April 12, ICBA Executive Vice President Christopher Cole and First Vice President James Kendrick called the plan “vague and unclear,” and said the OCC should rescind the draft supplement and request specific congressional authorization to grant fintech charters.

“ICBA welcomes a robust discussion on responsible innovation and supports the agency’s Office of Innovation,” stated the letter. “However, ICBA continues to have strong concerns about issuing special- purpose national bank charters to fintech companies without spelling out clearly the supervision and regulation that these chartered institutions and their parent companies would be subject to.”

If Congress allows the OCC to move forward, the agency should publish rules subject to public comment and hold outreach meetings on the new category of bank charters, ICBA wrote. Further, the OCC should answer essential questions raised by its white paper and proposed licensing updates, such as how these firms would be supervised as they enter the space now occupied by heavily regulated and intensely scrutinized national banks. The agency should also clarify to what extent it has consulted other state and federal regulators and their role in regulating chartered fintechs, ICBA wrote.

Both ICBA and ABA have stipulated that new chartered institution should be subject to the same supervision and regulation as required of community banks.

Rob Morgan, vice president of emerging technologies for the American Bankers Association, authored ABA’s comment letter, dated April 14. Morgan wrote that “a bank charter is a clear signal to customers that they are dealing with a trusted partner. The title of ‘bank’ carries significant weight in the mind of customers and should not be taken lightly. Any fintech company that is granted a national bank charter will receive the instant credibility that comes with being a bank. Likewise, any missteps by a fintech company operating through a national bank charter will inevitably reflect on all banks.”

The ABA letter went on to note that it was “happy” to see clarifications to the original white paper with regard to Community Reinvestment Act standards, rules against “comingling of banking and commerce” and language that limits special-purpose chartered fintechs from deposit taking.
The Conference of State Bank Supervisors also sent the OCC a comment letter in response to its proposed guidelines, reiterating that state regulators remain firmly opposed to the proposed charter.

The CSBS letter refers to previous comment letters stating that the charter would be an unprecedented, unlawful expansion of the OCC’s authority and goes on to detail how the proposed charter would result in a fatally flawed regulatory framework.

Shortly before the comment period ended, the OCC announced that its Office of Innovation will host two days of office hours for national banks, federal savings associations and financial technology companies wishing to discuss the OCC’s perspective on responsible innovation. This initial round of meetings will be held in the OCC’s San Francisco field office on May 16 and 17.

“The OCC’s Office of Innovation office hours are an opportunity to have candid discussions with OCC staff regarding financial technology, new products or services, partnering with a bank or fintech company or other matters related to financial innovation,” said Acting Chief Innovation Officer Beth Knickerbocker.

Interested parties may request a meeting during the two-day office hours session through the OCC’s Office of Innovation Office Hours Invitation. Specific meeting times and arrangements will be determined after the OCC receives the request (email or call 202-649-5200).

OCC staff will provide feedback and respond to questions. Each meeting will be no longer than one hour. The OCC asks attendees to provide some information about why they are interested in meeting with the agency prior to the meeting. The OCC will meet with up to 15 companies over the two-day period. The OCC anticipates holding office hours in other designated cities at a later date.

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