WASHINGTON — A senior Treasury Department official said he was disheartened by state regulators’ negative response to its fintech report, which supported the Office of the Comptroller of the Currency’s plans to create a national fintech charter.
“I’m really disappointed in kind of the reactions of the states to our report,” said Craig Phillips, counselor to Treasury Secretary Steven Mnuchin, at a conference in Washington Wednesday. “In no way are we trying to undermine the role of state regulation and definitely there is a collaboration between states and the federal.”
Phillips said fintechs need to be able to follow a single set of rules if desired, noting that registering in 50 different states puts U.S. firms at a competitive disadvantage to those operating overseas.
“At the end of the day, the U.S. already has a very fragmented regulatory system among our market regulators and our banking regulators,” Phillips said. “And the lines that would be drawn between consumer protection, prudential management, accessing securitized product market if you’re a lender, are very complicated because of this regulatory platform. If you then introduce 50 states … and you don’t have some rational way of explaining that, it’s just a huge disadvantage versus other countries.”
The comments come as state regulators, including the New York State Department of Financial Services, have filed lawsuits in an attempt to block the OCC’s national fintech charter, arguing that it goes beyond the regulator’s statutory authority.
The OCC's decision to offer a fintech charter came immediately after Treasury recommended such a move as part of a July report on how fintechs should be overseen. Phillips highlighted several recommendations from that report that Treasury is actively pushing to get implemented. Among them, he emphasized that it's important for the government to create a single federal data security and breach notification standard.
“We obviously have an incredibly fragmented system that increases the paranoia on this topic and it really makes the liability associated with data management more unpredictable,” Phillips said.
He also said that Treasury would like to see Congress take action on valid-when-made and true lender doctrine. The July fintech report appeared to criticize a ruling by the U.S. Court of Appeals for the Second Circuit, which held that debts sold across state lines can be subject to state usury laws, known as the Madden decision.
“Codifying valid-when-made and the true lender doctrine is something that, every time I bring this up, there seems to be bipartisan support for, but Congress has had a hard time getting together on it,” Phillips said.
