On December 2, 2016, the Office of the Comptroller of the Currency (the “OCC”), which licenses and regulates in part National Banks, issued a white paper, and Comptroller of the Currency Thomas Curry spoke, on voluntary licensing as “Special Purpose National Banks” certain FinTech companies that meet OCC requirements. “FinTech” is usually defined as financial technology firms that use technology to provide financial services, such as lending and electronic payment services.
The OCC concluded that it could use its statutory authority to license Special Purpose National Banks that carry out fiduciary activities or that conduct at least one of the following three core banking functions: receiving deposits, paying checks, or lending money. Moreover, the OCC concluded that this authority has been used to cover new activities as part of the business of banking or traditional activities carried out in new ways. For example, it has concluded specifically that issuing debit cards or engaging in other means of facilitating payments electronically are the modern equivalent of “paying checks”.
The idea would be to issue national licenses – on a voluntary basis – to FinTechs carrying out banking activities, such as lending and payment services, and meeting the applicable regulations to the extent relevant. The OCC recognizes that other regulators, such as the Federal Reserve Board and the Consumer Financial Protection Bureau, likely would have oversight as well. But, for example, if a FinTech firm is not taking deposits, it would not need to get approval and insurance from the Federal Deposit Insurance Corporation, although it might need still to comply with certain aspects of the Federal Deposit Insurance Act.
Comments on the paper are due by January 15, 2017.
FinTech firms that obtain an OCC license likely will preempt most of the welter of state regulatory requirements that apply to them, and, of course, would have the caché of being national banks. The OCC has made clear, however, that FinTech firms seeking such a license will need to comply with stringent OCC requirements, such as submission of a detailed three-year business plan and other submission requirements, and ongoing supervision as a national bank. There is also some concern that this could eventually be made mandatory for at least larger FinTech firms.