A proposal to allow fintech companies to have special bank charters has fallen into question due to the departure today of the head of the Office of the Comptroller of the Currency (OCC). Thomas Curry, who proposed allowing FinTech companies to have the special bank charters, steps down today.
Curry had planned to stay on after officially finishing his five-year term at OCC, an independent bureau within the U.S. Department of the Treasury, so he could push through the plan, which has drawn opposition from state regulators.
As he prepared to step down, Curry emphasized the importance of allowing online lenders to have flexibility in the type of license they use.
The OCC believes making special purpose national bank (SPNB) charters available to qualified fintech companies would be in the public interest. An SPNB charter provides a framework of uniform standards and supervision for companies that qualify.
Keith Noreika, a partner at law firm Simpson Thacher & Bartlett LLP, will run the OCC on an interim basis beginning today. He is a member of the Trump transition team and brings experience advising banks on regulatory issues. His views on Curry’s fintech plans are not known, but without a strong supporter in the government, the proposal is likely to fall by the wayside.
Getting a long-term replacement for Curry could take months. It requires Senate approval. Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin, is considered a possible nominee.
Many fintechs want a federal license, but state regulators claim they have jurisdiction over lenders that are not actually banks, and they have sued the OCC over its plan to offer such an option.
Fintech companies, unlike banks, do not lend from customer savings. Online lenders and payment companies act like banks but do not take in deposits. Their money-managing tools are oftentimes ahead of traditional banks.’
Last month, an alliance of state banking regulators took its case to federal court and asked that a judge block the OCC from developing a federal charter.
The Conference of State Bank Supervisors, which represents state banking regulators, called the OCC plan “an unprecedented, unlawful expansion of the chartering authority given to it by Congress.”
The elimination of the special fintech charter could impede the number of new tech-enabled “challenger” banks that could compete with established incumbents. Fintech companies could be put off by the lengthy and costly process of applying for a full banking license.
The OCC, meanwhile, has other challenges to face. The offfice came under heavy criticism in September when Wells Fargo & Co announced that rogue employees opened as many as 2 million bank accounts without customer approval, according to Reuters.
The OCC has told bank examiners to clamp down on unlawful transfers but not legal transfers, especially in immigrant communities.