As we reported last fall, New York Department of Financial Services Superintendent Maria T. Vullo stated that she was “ardently opposed” to the Office of the Comptroller of the Currency’s (OCC’s) intention to process applications for a new financial technology (fintech) company charter. We now see just how much her counterparts in other states share that view, as the state bank regulators recently came together under the Conference of State Bank Supervisors (CSBS) banner to ask the federal courts to stop the OCC’s fintech charter initiative.

In its complaint in Conference of State Bank Supervisors v. Office of the Comptroller of the Currency  filed on April 26 in the US District Court for the District of Columbia (Complaint), the CSBS has asked the court to declare that the OCC’s creation of the fintech charter is unlawful and that the OCC be enjoined from pursuing this initiative—saying, in substance, that the OCC doesn’t have the statutory authority to grant nontraditional bank charters of this nature.

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After signaling earlier this year that it was considering delaying the effective date of the Prepaid Accounts under the Electronic Funds Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) final rule (Prepaid Accounts Rule), the Consumer Financial Protection Bureau (CFPB) has officially delayed the effective date of the Prepaid Accounts Rule for six months to April 1, 2018. This delay comes as the CFPB has been facing significant pressure from industry, the US Congress, and consumer groups to delay or (in the case of consumer groups) retain the original effective date of the rule.

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Notwithstanding objections from both parties of the US Congress and state banking regulators, the Office of the Comptroller of the Currency (OCC) is moving forward with its proposal to accept applications from financial technology companies for a special purpose national bank charter (FinTech Charter) and has issued draft guidelines (FinTech Charter Guide) for its evaluation of FinTech Charter applications.

We have previously discussed the OCC’s FinTech Charter proposal and its somewhat rocky path (read our previous posts on the topic here and here). The OCC is inviting comments on the draft through April 14, 2017, although we do not expect the final version of the guide to deviate significantly from the current draft.

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The Office of the Comptroller of the Currency’s (OCC’s) recent announcement that it will receive and process applications for financial technology (fintech) charters is attracting negative attention from diverse sectors of the public arena.

On January 9, Senators Sherrod Brown (D-OH and the ranking member of the US Senate Committee on Banking, Housing, and Urban Affairs) and Jeff Merkley (D-OR) wrote to Comptroller of the Currency Thomas Curry questioning whether the OCC has the authority to grant charters to fintech firms. The senators’ letter notes, among other things, that the authority granted by Congress to the OCC to charter special-purpose national banks is very specific and that the OCC’s proposed activity may exceed what is allowed under the National Bank Act.

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On December 2, the Office of the Comptroller of the Currency (OCC) announced that it would “move forward with considering applications from financial technology companies” to become special purpose national banks. Simultaneously with that announcement, the OCC released a paper (FinTech Paper) outlining preliminary parameters for granting special purpose national bank charters for FinTech companies (FinTech charters).

Although the announcement and release of the FinTech Paper are being positively received in the financial services marketplace, the final parameters of a FinTech charter are still being developed. The OCC is seeking public comments on its FinTech Paper to help develop detailed policies, procedures, and standards for accepting, reviewing, and approving FinTech charter applications. As such, FinTech companies and other interested parties have a unique opportunity to help shape the OCC’s review standards for FinTech charters.

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As National Cybersecurity Awareness Month comes to a close, the federal financial regulators have been releasing guidance related to cybersecurity and financial technology (FinTech) issues faster than a teen can complain about slow Wi-Fi.

In the last 10 days, there have been a number of notable releases:

• The Board of Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) released a joint advance notice of proposed rulemaking titled Enhanced Cyber Risk Management Standards that would apply to large supervised financial institutions and their service providers.
• The Federal Reserve Board’s Secure Payments Task Force identified its key priorities for addressing secure payments: payment identity management, information sharing to mitigate payments risk and fraud, and data protection. The task force has invited industry feedback on these priorities through November 8.

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On October 5, the Consumer Financial Protection Bureau (CFPB) released its final rule (Final Rule) extending an array of new substantive restrictions, upfront and ongoing disclosure obligations, and government reporting requirements on prepaid cards and a range of electronic non-bank accounts, commonly referred to as “digital wallets.”

The Final Rule makes a number of changes to both Regulation E (which implements the Electronic Funds Transfer Act) and the credit card rules that are part of Regulation Z (which implements the Truth in Lending Act). The Final Rule takes effect on October 1, 2017, with certain provisions phased in over time, and the reporting requirement for issuers is delayed until October 1, 2018.

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On July 28, the Consumer Financial Protection Bureau (CFPB) released a detailed summary of regulations it is considering imposing on third-party debt collectors. These proposals, once finalized, stand to potentially form the basis of significant “unfair, deceptive, or abusive acts or practices” (UDAAP) enforcement and regulatory actions against large bank and non-bank financial institutions that use third-party debt collectors to collect debts on their behalf or sell charged-off debt to third-party debt collectors.

Read our LawFlash for further information on the CFPB’s action.

On July 6, North Carolina Governor Pat McCrory signed into law legislation to bring certain virtual currency businesses expressly within the existing money transfer business regulatory scheme by repealing and replacing the current law with a new article.

The new law explicitly captures virtual currency with new definitions. Under the prior law, virtual currency intermediaries were not expressly covered, although the broad definitions of “money transmission” and “monetary value” (“[a] medium of exchange, whether or not redeemable in money”) prior to the new law’s adoption likely captured virtual currency. Coinbase Inc. and Circle Internet Financial Inc. are already licensed as money transmitters. The new law provides greater legal certainty, however, by explicitly providing that money transmission “includes maintaining control of virtual currency on behalf of others.”

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The California Department of Business Oversight (DBO) has launched an inquiry into the increasingly popular marketplace lending industry. The stated purpose of the inquiry is “to assess the effectiveness and proper scope of [the DBO’s] licensing and regulatory structure as it relates to [marketplace] lenders.”

The DBO sent its online survey to 14 marketplace lenders and requested a variety of information, including the volume of business, types of loans, APR, delinquency rates, and investor funding or sale data. The survey requests data from January 1, 2010 through June 30, 2015. Responses to the survey are due by March 9, 2016. Although the DBO has not identified the 14 marketplace lenders that received the survey, reports confirm that the inquiry includes both consumer lenders and commercial and small business lenders.

The DBO’s inquiry follows the Department of the Treasury’s request for information earlier this year seeking public comments on marketplace lending. Given the growing popularity of marketplace lending platforms among consumers and small businesses, further regulatory interest and possible future regulatory action are likely.

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