Special Purpose National Bank Charters for FinTech Companies

The Milken Institute Center for Financial Markets provided a response to the Office of the Comptroller of the Currency (OCC) upon request for comments regarding special purpose national bank charters for FinTech companies.

The white paper, along with the OCC’s adoption of a final rule implementing a receivership framework for national banks not insured by the Federal Deposit Insurance Corporation (FDIC), demonstrates the OCC’s commitment to rightsizing regulations to fit the realities and demands of a 21st century, internet-based economy. Rather than recreate the regulatory wheel, the OCC has sought to apply existing regulatory frameworks applicable to national banks to FinTech platforms in a more tailored way. We are encouraged to hear of the OCC’s view that special purpose FinTech charters “may need to account for differences in business models and the applicability of certain laws,” and would urge the agency to continue to bring fresh thinking to decades-old regulatory frameworks amenable to current and future innovations in the financial services industry. 

Our comments reflect on the following observations from the OCC’s white paper:

• A special purpose FinTech charter could address competitiveness concerns raised by currently chartered national banks and FinTech platforms.
• A special purpose FinTech charter will not undermine – but rather enhance – oversight of FinTech chartered platforms. 
• The requirements under a forward looking business plan for both insured and uninsured national banks may impede their ability to respond and adapt to changes in the financial services sector.
• The perceived ad hoc review process for FinTech platforms interested in seeking a special purpose charter could lead to confusion and claims that the OCC favors a particular model or activity.
• The OCC’s interest in determining how a special purpose charter could address borrower “protection gaps” between consumer and small business finance risks conflating the two forms of finance, irrespective of the models and current efforts to improve disclosure in the small business finance space.