NYDFS superintendent opposes OCCs charter proposal for fintech firms

The Superintendent of New York State Department of Financial Services (NYDFS) Maria T. Vullo has submitted a comment letter to the Comptroller of the Currency (OCC) in opposition to the proposal to create a new national bank charter for ‘fintech’ companies.

The comment letter highlights the argument, where Vullo states that unlike state regulators, the OCC has never regulated nonbank financial institutions. Also, the DFS supervises over 2000 banking and non-banking institutions that use technology as a key part of business in order to lend and transfer money that includes licensed lenders, sales finance companies, digital currency exchanges, among others.

The letter also argued that the OCC proposal threatens to create an entirely new federal regulatory program, creating serious regulatory uncertainty that threatens to invade state sovereignty and embolden those who may seek to evade strong state consumer protection laws.

“The OCC should not use technological advances as an excuse to attempt to usurp state laws that already regulate fintech activities where they intersect with banking and lending, whether depository or nondepository,” Superintendent Vullo, said. “A one-size-fits-all federal charter will not work to create a level-playing field among all financial services companies, or to alleviate risks.  On the contrary, the proposal increases risk, creates an opportunity for regulatory arbitrage and attacks states sovereignty.  New York will continue to protect our markets and consumers.”

DFS said that the national charter would encourage large “too big to fail” institutions, and permit a small number of tech-savvy companies to dominate types of financial services. It also said that the proposal could permit companies to engage in regulatory arbitrage and avoid important state consumer protection laws, such as strong usury protections.

“In summary, the proposed ‘fintech’ charter substitutes an effort to appear innovative for a complicated, problematic, new regulatory regime. The New York DFS opposes any new regulatory regime that impacts state regulation and the protection of our consumers and markets. The proposed OCC special purpose charter fails on each ground,” the letter concluded.

DFS is inviting state regulators, legislators, and other policymakers to oppose the proposed charter of OCC and thus to support the country’s strong state-based regulatory system.