15 Aug 2018
Financial technology companies that lend online are sounding a cautious note on a U.S. banking regulator’s plan to offer them special federal charters because of concerns over legal challenges and requirements that are more onerous than expected.
The Office of the Comptroller of the Currency said last month it would accept applications for banking licenses from the likes of LendingClub (LC.N) and OnDeck Capital Inc (ONDK.N), online lenders that do business outside the traditional banking system.
They then could operate nationwide under one banking license rather than a patchwork of state-specific regulations.
Fintech executives lobbied for the license and applauded the OCC’s decision, but they are not immediately rushing in, they told Reuters.
“You’re going to have a bunch of lenders sitting around waiting. ‘I’m not going to go first, you go first,’” said Brock Blake, chief executive of Lendio, a small-business lending platform.
No companies have formally applied for a charter yet. An OCC spokesman said it is “just one option” for such companies, and any firms receiving a charter will be regulated in the same way as similar national banks.
“The decision was made to support innovation, promote economic opportunity, and provide greater choice to consumers and businesses,” said spokesman Bryan Hubbard.
Many fintech companies expect the charter to become embroiled in a legal battle between the federal government and states.
The New York Department of Financial Services (NYDFS) and the Conference of State Bank Supervisors (CSBS) challenged the OCC in a pair of 2017 lawsuits, when the OCC was considering fintech charters. Those suits were dismissed as premature but both parties could now reprise them and have told Reuters they are considering their options.
The OCC said it has the legal authority to issue such charters.
“I would expect that challenge to pick up where it left off,” said Keith Noreika, a partner at the law firm Simpson Thacher who led the OCC for part of the initial legal bout.
– By Michelle Price and Pete Schroeder, Reuters, 14 August 2018.
Link to Reuters.
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