Removing Barriers Blog

CUNA discusses issues with proposed payment charter in letter to HFSC fintech TF
Posted September 30, 2020 by CUNA Advocacy

Earlier this week, CUNA wrote to the House Financial Services Task Force on Financial Technology prior to the hearing on "License to Bank: Examining the Legal Framework Governing Who Can Lend and Process Payments in the Fintech Age."  Credit unions welcome fintech innovation and competition, but are concerned that many products and services offered by fintechs skirt consumer protection regulations example and cited the “payment charter” proposed by Acting Comptroller of the Currency Brian Brooks.

“Recently, Acting Comptroller of the Currency, Brian Brooks, has proposed what has been called a “Payment Charter,” but this appears to be a national money transmitter license that preempts state licenses requirement and provide a possible onramp for nonbanks to directly access to the Federal Reserve's payment clearing system,” the letter reads. “The Acting Comptroller has indicated in several forums that the OCC does not need to pursue rulemaking for the payments charter and that the Acting Comptroller can approve this charter at any time.

CUNA opposes the so-called payments charter,” it adds. “We believe the OCC should undertake an open and transparent process in considering new charters. This process was followed with the notice and comment rulemaking process for the fintech charter, but has not been done with payments charter.”

The absence of public process concerns CUNA and the lack of specificity leads to numerous questions about how the Office of the Comptroller of the Currency would regulate such entities.

“We continue to have serious concerns with banks partnering with fintechs for lending, especially when these relationships seem designed to avoid consumer protection laws. At the state level, there are licensing or registration requirements to operate within a state, state-specific interest rate limits, state-specific loan value caps, and other consumer protections,” the letter reads. “State requirements are largely enforced by state financial regulatory authorities and state attorneys general. Fintechs can use a bank as a lending partner to avoid many of the state-specific regulations, which rob state regulators of their ability to properly regulate financial activities.”

CUNA’s longstanding position is that similar products and services should be regulated similarly so that “consumer protection runs with ah product or service, not the entity providing the products or service,” the letter reads.