Fintechs that get bank charters should be subject to CRA. Period.

While consumer groups and the banking industry sometimes disagree, there’s one thing we do agree on: the need to stop the Office of the Comptroller of the Currency’s last-minute attempt allowing fintechs to become national banks without adhering to the full consumer protection and community reinvestment laws.

In the latest move opening the banking door to fintechs, acting Comptroller of the Currency Brian Brooks has provided unbundled financial services to fintechs on a national scale by selecting the regulatory requirements that apply to them. That’s not the way the law works for traditional banking charters, and that’s not what generations of consumers have come to expect in their banking relationships.

But last year, Brooks made clear in public comments that the OCC has the authority to grant a bank charter to a company that does not take deposits. Our organizations disagree.

Brooks’ statements have encouraged firms like blockchain-based Figure Technologies to recently file a banking application with the OCC in order to conduct lending, payments and custody activities with the intent to take deposits, without becoming an insured depository institution.

The OCC does not have the authority to do that.

The Figure application is one of a recent series of applications from fintechs (including Paxos Trust, BitPay Trust, and Protego Trust) that seek to gather deposits but have an exemption from deposit insurance.

The Figure application is fundamentally different, however, and has elevated charter arbitrage to a new level. It intends to accept deposits, but only for amounts greater than $250,000. And these deposits would be uninsured.

Customers of Figure could open an insured deposit account, but could only do so through a partner bank.

Historically, the business of national banking has been a three-legged stool in that they had to: make loans, facilitate payments and take deposits. That interpretation was undisputed until 2016, when the OCC outlined the possibility of granting special-purpose charters to fintechs so long as they met at least one of those three activities.

From the start, the fintech charter encountered legal obstacles, creating so much uncertainty that fintechs chose to remain on the sidelines for years.

The OCC’s argument was eventually rejected in 2019 by a U.S. District Court for the Southern District of New York judge who barred the OCC from accepting nonbank applicants for its special-purpose fintech charter.

If the OCC approves Figure for a national banking charter, it will grant the firm all the benefits of a traditional bank with fewer obligations, similar to how its failed fintech charter was structured.

The OCC would also set a risky precedent for future applicants, who could take advantage of this detrimental reinterpretation of banking law. If approved as a national bank, fintechs like Figure could then apply for membership in the Federal Reserve system. Doing so would allow the firm to avoid state consumer protection requirements and be exempt from the Community Reinvestment Act , which requires banks to meet the needs of lower-income communities.

The CRA ensures that banks provide loans, investments and services to underserved communities throughout the institution’s footprint. However, a bank only has to comply with the full CRA requirements if it gathers insured deposits, approved by the Federal Deposit Insurance Corp.

In the case with Figure’s OCC application, it is proposing a substitute plan that is vague on details, offers no clear measures for holding it accountable to meet the needs of underserved communities, and without a clear timeline for implementation. The OCC itself has not explicitly outlined how these substitute plans would work outside of full CRA compliance while still equally meeting the needs of underserved communities.

The OCC’s authority and the obligations of a bank that receives a national charter are clear. A national bank must accept deposits and those deposits must be FDIC insured.

An insured depository must comply with the Community Reinvestment Act. Without insured deposits and a clear CRA plan, this application — and others like it — must be denied.

Rushing through an application of this magnitude, with this much at stake, is dangerous and ill-advised. We urge the OCC to deny this application, and look to Congress to define the scope, benefits and obligations of a banking charter.