Regulators Seek to Address Interstate Regulation of Fintech Companies

2 min read • Feb 16, 2017 • Lendio

A recent letter from the California state commissioner of business oversight raises hope for financial technology (fintech) companies about the future of the state-by-state licensing system. The letter, written Tuesday by Jan Owen, Commissioner of the Department of Business Oversight (DBO), addressed 13 fintech companies and acknowledged the limitations of the state-by-state licensing system, summoning company leaders to meet with the commissioner for an open dialogue.

California has a lot to say in the fintech regulation discussion, with firms growing their businesses at a much faster pace in the state than the U.S. as a whole, according to DBO data.

Talk of a less restrictive charter aiming for greater expansion and unification of products and services is garnering attention from fintech firms. Such companies have been subject to regulations requiring they obtain a license in each state they serve.

In December, the Office of the Comptroller of the Currency (OCC) announced it would be making special purpose national bank charters available to fintech companies.

In his speech at Georgetown University detailing the new charters, Thomas J. Curry, Comptroller of the Currency said, “The OCC will move forward with chartering financial technology companies that offer bank products and services and meet our high standards and chartering requirements.”

“Providing a national charter to those responsible innovators who seek one and meet our high standards can help promote economic growth across the country and recognizes that technology-based products and services are the future of banking and the economy,” Curry added.

An independent bureau of the Department of the Treasury, the OCC charters, regulates and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks.

States remain divided over regulation standards, as New York looks to establish licensing requirements on marketplace lenders that previously operated in the state without licenses.

Owen’s letter addressed Affirm, Avant, Bond Street, CAN Capital, Fundbox, Funding Circle, Kabbage, LendingClub, OnDeck, PayPal, Prosper, SoFi and Square, and emphasized the state’s continued focus on consumer protection standards.

A group of California-based community organizations have expressed concern over the latest deregulation, calling upon the OCC for “vigorous obligations, supervision and enforcement of fintech firms with regard to consumer and small business protection, fair lending, community reinvestment, transparency, privacy and public participation concerns” in a recent letter to Curry.



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