OCC Announces Special Purpose Charters For Fintech Firms

On Friday December 2nd, the Officer of the Comptroller of the Currency (OCC) announced that it would consider granting financial technology (fintech) firms special purpose national bank charters. The OCC's proposal constitutes a major development for fintech companies and the financial services industry more generally. This move builds on recent actions taken by the OCC in an attempt to promote financial innovation, including releasing a white paper regarding responsible innovation in the financial industry in March, and announcing the creation of an Office of Innovation in October.

Under the OCC's proposed framework, fintech companies may apply for a special purpose national bank charter—the same type of charter that the OCC has granted primarily to trust banks and credit card banks. In a release summarizing the proposal, the OCC claims that the proposed system will improve safety and soundness of fintech institutions, promote consistency in the application of laws and regulations, ensure fair treatment of customers, and strengthen the federal banking system. Comptroller of the Currency Thomas J. Curry also explained that the banking system will be healthier if fintech companies "enter the system through a clearly marked front gate, rather than through some back door."

Under the OCC proposal, fintech companies would be treated similarly to national banks from a regulatory perspective. Non-bank fintech companies could seek a single banking license from a single national regulator, as opposed to numerous licenses across multiple states. Because the OCC's regulations would generally preempt state laws, fintech companies would be able to follow a single, consistent regulatory framework, as opposed to a patchwork of regulations across 50 states. However, the OCC noted that fintech firms that are granted a special purpose charter would still be subject to the same state laws as national banks, including state unfair and deceptive acts and practices statutes, as well as state anti-discrimination, fair lending, and debt collection laws. It is also worth noting that firms could still seek licenses or charters at the state level, but a unified federal approach is a welcome option.

Like national banks, fintech firms that are granted a special purpose charter would be under the jurisdiction of the OCC and subject to the agency's regulatory scrutiny. The OCC has indicated that it will hold these firms to rigorous standards on issues concerning safety...