Talk about a Fintech Charter in the US has state legislatures on their feet.
Fintech companies have faced several challenges in the United States attempting to comply with the various laws and licensing requirements of each state. Even if a Fintech company is not based in a certain state, it is still subject to a state’s jurisdiction if a customer resides or operates within the state’s borders.As Fintech companies expand the scope of the services they offer, policymakers are faced with the challenge of enacting legislation that both fosters innovation and addresses public policy concerns. Public policy concerns include maintaining the safety of the financial system, consumer protection, cybersecurity, anti-money laundering, and preventing terrorist financing.One strategy to overhaul individual state regulatory requirements is by obtaining a national bank charter. This allows Fintech companies to operate under the federal law as opposed to those of each of the 50 states. However, a bank charter comes with its own challenges and intense supervision. Just because there may be much fewer regulatory bodies, the oversight and regulations are extensive.The OCC has presented the idea of a Fintech Charter to bridge the disparity and create clear regulatory framework that promotes Fintech innovation. This sounds like a good idea but the chances of a Fintech Charter being launched anytime soon is slim.
Critics have raised the concern that a Fintech Charter would allow Fintech companies to offer baking-related services without being subject to a bank charter. The OCC responded to this concern stating that if they “decide to grant a national charter to a particular fintech company, that institution will be held to the same high standards of safety and soundness, fair access, and fair treatment of customers that all federally chartered institutions must meet.”Additionally, states have claimed that a Fintech Charter is beyond the scope of the OCC and would take regulatory power away from the states.Whether or not we see a Fintech Charter in the near future, we expect new legislation to continue to shape the Fintech industry.
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