On October 11, House Financial Services Committee Ranking Member Patrick McHenry (R-NC), along with Republican members of the Task Force on Financial Technology, sent a letter to Acting Comptroller of the Currency Michael J. Hsu requesting clarification of the OCC’s position regarding banking – fintech partnership. The lawmakers argued that the OCC previously “worked to provide banks and their customers with a clear understanding of regulatory and supervisory expectations around new products and services,” as well as how to properly assess risk, but argued that leadership under the current administration has not continued with that. Citing the importance of innovation to the U.S. economy and the impact new financial products and services can have on cost, inclusion and competition, the letter expressed concerns about the potential for further uncertainty surrounding these partnerships and the resulting consequences for consumers. “Technological innovation fostered by fintech partnerships has enabled banks to reach segments of the population that may have been left behind and increase customer engagement,” the lawmakers wrote, expressing their belief that the benefits of these partnerships far outweigh the risks. “Much of this innovation has been driven by industry newcomers who have developed a new product or business model. When properly regulated, these partnerships can provide greater financial inclusion, stimulate technological innovation and foster competition that ultimately for the benefit of consumers.”
Citing an action by President Biden in June 2021, repealing the OCC’s “true lender” rule under the Congressional Review Act (covered by InfoBytes here), the lawmakers asked the OCC whether they expect fintech partnerships to end as a result of potential regulatory changes, and questioned how the agency plans to “ensure that examiners do not discourage innovation through fintech partnerships” or “impose unreasonable burdens on banks and fintechs.” The letter also asked the OCC to respond to a number of questions, including, among other things, how it plans to determine acceptable terms for bank-fintech partnerships, how it intends to analyze fintechs that help bring banking into the digital era, and how examiners will evaluate a bank’s assessments of third-party risk management and cybersecurity resilience and whether such assessments will “be carefully tailored to the actual risk posed by the particular bank-fintech partnership.”
