Interim OCC Chief Should Put Fintech Charter on Ice
The first week at a new job is always busy. There is finding your office, doing paperwork, being introduced to people whose names you will promptly forget. It’s rare to get any work done that first week, but you should try.
One thing that Keith Noreika, the new acting head of the Office of the Comptroller of the Currency, could tick off of his to-do list is to pause the OCC’s efforts to develop a fintech charter. Noreika should then take some time to assess whether the charter is developing in a way that best serves the public.
Former Comptroller Thomas Curry deserves major credit for getting the OCC to think about how to encourage innovation in the banking sector. The fintech charter is an important piece of this effort. Unfortunately, based on the most recent information put out by the OCC, it appears that the previous leadership wasn’t thinking sufficiently outside of the box. The charter is shaping up to needlessly mimic many of the requirements of traditional depository institutions, even though those requirements do not make sense in the nondepository context.
For example, requiring firms to get OCC permission to change business plans, and to convince the agency that the firm will not fail, are not necessary. They could in fact be counterproductive. What is important, and what the current draft acknowledges but fails to sufficiently prioritize, is that a firm be able to fail with grace so its customers are protected.
The charter also appears to be improperly imposing laws that Congress did not intend for nondepository institutions. Whatever the merits of placing Community Reinvestment Act-like requirements on nondepository institutions, it should be Congress, not the OCC, that makes that call.
Implementing a charter with these problems would represent a major missed opportunity to make the financial services industry more innovative and competitive, which would benefit consumers and Main Street businesses alike. Before the process moves further, and before firms make choices or bear costs to pursue such a charter, the OCC needs to allow the new administration to decide what the charter should look like.
However, the OCC should not press pause on its response to the lawsuit filed by the Conference of State Bank Supervisors challenging the charter. The agency should fully contest CSBS’s allegation that the OCC has exceeded its authority. The lawsuit presents an important question, and the case represents as good a vehicle as any to ensure that any questions about the OCC’s authority are fully resolved.
Further, to the extent the states feel they are at a legal disadvantage competing with the OCC for charter applications, they should try to address that disadvantage by seeking to expand their own authority to offer innovative charters, not by attempting to inhibit the OCC’s progress. A successful defense of the OCC’s powers should force the CSBS to focus its efforts in a more productive and beneficial way.
After having accomplished all of that, Acting Comptroller Noreika should take some time to check out his new neighborhood; there are bound to be some good spots for lunch.