New York Just Told the OCC to Stick It

canstockphoto9769080Turns out, not everyone is happy about the OCC’s decision to grant banking licenses to (suitable) fintechs.

The New York State Department of Financial Services submitted a formal comment letter to the OCC today, saying that the latter, frankly, isn’t going to do the job of regulating fintechs — and isn’t even authorized to do so under the National Bank Act. Or in New York parlance, the OCC should fuggedaboutit.

Financial Services Superintendent Maria T. Vullo wrote in the letter:

NY DFS has been regulating nonbank financial services entities for over half a century. Our extensive experience includes the design and oversight of regulation carefully developed and tailored to address the specific risks presented by the types of institutions and activities ostensibly included within the OCC definition of “fintech.” The imposition of an entirely new federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape will invite serious risk of regulatory confusion and uncertainty, stifle small business innovation, create institutions that are too big to fail, imperil crucially important state-based consumer protection laws and increase the risks presented by nonbank entities.

Not all fintechs are created equal, Superintendent Vullo continued, so a “one-size-fits-all” federal charter will not work to create a level-playing field. Moreover, having a national charter is likely to “stifle rather than encourage” innovation, and benefit large companies at the expense of smaller ones.

It would be an avenue for larger, more-dominant firms to control the development of technology solutions in the financial services industry. Currently, small businesses can enter the fintech field and explore different technologies. The ability to start and license a business through a state licensing regime is the appropriate way to foster the development of technological enhancements and encourage small businesses.

DFS called on policymakers to oppose the OCC’s proposed rule, in favor of the current state-based regulatory system. The full letter can be accessed here.

New York just made the deadline for the OCC’s open comment period on this issue, which ends today. The comments are merely intended “to provide additional insight to help the OCC move forward with its plan,” agency’s spokesman told Bank Innovation previously.

The processes and considerations for obtaining the licenses are detailed in this paper.

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