WASHINGTON–State and federal regulators are beginning to knock heads when it comes to overseeing fintechs.
The U.S. Office of the Comptroller of the Currency will soon begin considering applications by financial-technology companies for national banking charters as a way to promote competition while both streamlining and strengthening regulation, noted the Wall Street Journal in its analysis. But under federal law banks with national charters don’t have to abide by some state lending rules, known as pre-emption, and that has some “banking regulators in some of the largest states” saying “they plan to aggressively challenge Washington’s power to override them, arguing that states have been much tougher on fintech firms than their federal peers—and warning against abusive payday lenders being able to exploit policies intended for tech startups,” the Journal reported.
Sens. Sherrod Brown (D-OH) and Jeff Merkley (D-OR) have sent a letter to the OCC suggesting its proposal would “upset the current financial regulatory structure,” and further suggesting alternatives including collaboration with state regulators to aid fintech startups.
The Journal reported that state regulators are arguing their rules barring loans above certain interest rates, known as usury laws, are a bulwark against abusive lending practices. The OCC proposal was open to public comments through Jan. 15.
The Journal reported that some state regulators also are discussing some defensive measures, such as a mechanism to make it easier for companies to apply across multiple states for consumer lending licenses.