WASHINGTON — Comptroller of the Currency Joseph Otting offered new details Wednesday about a federal charter for fintech firms, saying legal challenges by state regulators have not stopped those interested in the charter from moving forward.
Over the summer, the Office of the Comptroller of the Currency said it would begin accepting applications for the charter, continuing an idea first spearheaded by Otting predecessor, Thomas Curry. Yet following the announcement, New York state's banking regulators and the Conference of State Bank Supervisors said they would revive legal action to halt the OCC's effort.
“A number of entities have decided that it’s still worth going forward, and so I think that we will issue charters independent of [the states'] action,” Otting said, speaking during a session at a fintech event held by Georgetown University’s Law Center. “I also think that we will get our day in court on this issue and as you follow the national banking law, we have the right to be able to issue a charter for any entity that is in the business of banking.”
Otting also claimed that “a number of legal representatives” have said that the states will not be successful in their litigation.
Most recently, the New York State Department of Financial Services
“I view it as unfortunate that they will annoy consumers and restrict their choice by their actions,” Otting said of the legal challenges.
A number of institutions are currently going through the application process, and the agency expects to receive its first application by the end of this year or early next year, Otting said.
The first charter will likely be offered to a company that provides credit products over the internet, “where they are reaching consumers and small businesses,” he said, but added that in the longer term, the agency will look closer at how fintechs interact with financial institutions and customers.
“There are potentials on the horizon as we look at blockchain and other activities around tracking securities or tracking asset values that also could have applications with the national banking charter,” said Otting.
Otting also offered insight into the OCC’s process for evaluating risk for fintech companies applying for the charter, considering that they do not hold capital like a conventional bank.
“Most of the activity in the individual firms that are pursuing the charter are generally in the business today of providing that product and service, so we have a bit of a track record to be able to look at their activities,” he said.
As part of the application process, the fintech companies are required to present a forward-thinking business model, which the agency then stress tests, said Otting.
