Response to OCC White Paper Exploring Special Purpose National Bank Charters for Fintech Companies

Thank you for the opportunity to comment on the Office of the Comptroller of the Currency’s (OCC’s) proposal for extending national bank charters to fintech companies. The Mercatus Center at George Mason University is dedicated to bridging the gap between academic ideas and real-world problems and to advancing knowledge about the effects of regulation on society. This comment, therefore, does not represent the views of any particular affected party or special interest group, but is designed to assist the OCC in establishing a regime that will benefit the public by facilitating increased innovation, competition, and access to financial services. 

I. Introduction

The OCC is considering whether and how to grant special purpose national bank charters expected to be used primarily by non-depository fintech firms. These “fintech banks” will enjoy all of the relevant powers granted to national banks under the National Bank Act and will be subject to supervision by the OCC. In response to the OCC’s proposal and request for comment, this letter discusses how the OCC should structure its fintech bank charter program and how the current proposal should be modified to better accomplish its goals.

We commend the OCC for its willingness to consider what it can do to foster innovative means of providing financial services. The OCC sets a model for other agencies by asking whether the current regulatory structure is unduly impeding competition and inclusion and by looking for ways to remove any impediments it finds. As the OCC’s proposal recognizes, a fintech charter has the potential to benefit consumers while also strengthening the national bank system, the affected companies, and the country’s economic growth and dynamism.

We agree that a special purpose national bank charter for fintech companies has promise, and thus we support the OCC’s general proposal to offer a fintech charter. A properly constructed and administered fintech charter offers public policy benefits. The charter can provide a clear legal framework within which fintech firms can serve consumers under effective regulatory oversight without having to comply with multiple, conflicting state laws. Legal certainty will enable firms to focus their efforts on understanding and meeting consumer needs. A workable fintech charter will facilitate innovations that can improve the functioning of the financial markets and the lives of those that use them. A special purpose charter will not serve to foster innovation, however, unless the OCC properly designs and administers the charter.

Accordingly, we make the following recommendations about how the OCC should proceed. In making these recommendations, we are mindful of the OCC’s goals of fostering innovation, protecting consumers, and acting in compliance with principles of good government. Specifically, we recommend that the OCC:

• avoid imposing unnecessary constraints on fintech charter recipients;
• make the standards and expectations for firms seeking a fintech charter transparent and objective and limit the staff’s ability to add and subtract requirements for particular firms;
• avoid using the chartering process to protect national banks from competition;
• recognize a role for competitive federalism; and
• work with other regulators to provide fintech firms consistent federal regulatory treatment.

We discuss each of these recommendations in turn.

Continue reading