NEW YORK—The New York State Department of Financial Services is opposing the Office of the Comptroller of the Currency’s proposal to grant national bank charters to fintech companies.
In a comment letter written by NYDFS Superintendent Maria T. Vullo, NYDFS claimed that the OCC's proposal to give national bank charters to fintech firms would lead to a “parade of problems,” such as increasing regulatory risk and uncertainty, stifling small business innovation, creating institutions that are "too big to fail," undermining state consumer protection laws, and increasing the systemic risks posed by nonbank entities, JD Supra Business Advisor reported.
In the letter Vullo described the OCC's definition of fintech as "amorphous" and "exceedingly broad and undefined." She said that the OCC lacks authority to charter nonbank financial institutions under the National Bank Act.
“But even assuming the OCC had such authority, Ms. Vullo argued that the proposal would have significant negative effects on existing state regulatory regimes applicable to nonbanks and would encourage fintech companies to engage in regulatory arbitrage to avoid state consumer protection and usury laws. Ms. Vullo also touted the NYDFS's experience dealing with unique issues posed by nonbank entities, claiming that the OCC lacked experience in this arena and was ill-equipped to deal with those issues,” JD Supra Business Advisor reported.
The NYDFS comment letter also argues that the OCC's proposal would exacerbate public concerns about institutions that are "too big to fail" by allowing "a small number of technology-savvy firms [to] dominate different types of financial services simply because they were able to get a national charter."