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McHenry, FinTech Task Force Republicans Urge OCC’s Hsu to Provide Certainty for Bank-FinTech Partnerships

Washington, October 11, 2022 -

Today, the top Republican on the House Financial Services Committee, Patrick McHenry (NC-10), led Republican members of the Task Force on Financial Technology in sending a letter to the acting head of the Office of the Comptroller of the Currency (OCC), Michael Hsu. FinTech Task Force Republicans are urging Acting Comptroller Hsu to clarify the OCC’s position on partnerships between banks and financial technology firms and provide clarity to the marketplace.

Read the full letter to the OCC here.

Read key excerpts from the letter below:

“Dear Acting Comptroller Hsu,

“We write to seek clarification on several of your recent statements as well as actions taken by the Office of the Comptroller of the Currency (OCC) regarding the future of partnerships between banks and financial technology companies (fintech).  Innovation is a critical component of the U.S. economy, and we are concerned with the potential for further uncertainty around partnerships and the consequences for consumers. New financial products and services can drive down costs and foster greater inclusion and competition in our financial system. Under the previous administration, the OCC worked to provide banks and their customers with a clear understanding of the regulatory and supervisory expectations surrounding emerging products and services and how to properly assess risk. While we expected the OCC to continue to provide clear rules of the road and support innovative banking services, such has not been the case.

“For example, you recently highlighted five areas the OCC would prioritize in supporting community banks. Promoting fintech relationships was not among the five priorities. Instead, you stated:

“’[W]hen it comes to community banks’ third party relationships. This is not going to be easy and will require enhanced engagement, as we cannot simply adopt a lighter supervisory approach and expect less from community banks…. [M]ore work is needed, especially given the growth of banking-as-a-service arrangements, as those relationships are often complex or inverted and involve different risk considerations.’

“Let us be clear. 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. Much of this innovation has been driven by industry newcomers that have developed a novel product or business model. When properly regulated, these partnerships can provide greater financial inclusion, spur technological innovation, and foster competition that ultimately benefits consumers.

“Non-bank fintechs partner with banks for several reasons. Because of their deposit-based funding, banks tend to have the cheapest possible cost of capital among all capital allocators. Banks also have relatively large balance sheets, enabling them to absorb new loans rapidly, and are expert lenders. Finally, fintechs commonly partner with banks due to the special privileges Congress has given banks since the passage of the National Bank Act in 1864, including regulatory certainty about permissible interest rates. 

“Moreover, banks typically seek partnerships with fintechs for the comparative advantages they bring to the table, such as more effective branding or marketing and better technology to support underwriting or to manage a customer relationship. It is often more cost-effective for banks to outsource to a fintech partner, as it can be expensive and challenging for banks to focus on these activities in-house.

“When conducted properly, the benefits from these partnerships far outweigh the risks. Fintech partnerships can lead to cost savings for both fintechs and banks, increase competition, and provide faster, better, and cheaper banking products and services for consumers. Nevertheless, the model has generated political controversy. In June 2021, a Democrat-led Congress voted to nullify the OCC’s True Lender Rule along party lines, preventing the OCC from issuing any substantially similar rule without subsequent statutory authorization.  This single act will have repercussions for communities throughout the United States, including those who need credit the most. … “


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