McHenry Reintroduces Legislation to Foster Greater Innovation in Financial Services
Washington,
February 27, 2024 -
To ensure the United States continues to lead the world in financial innovation, the Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), reintroduced the Financial Services Innovation Act. This legislation establishes federal regulatory “sandboxes” through Financial Services Innovation Offices (FSIOs) at federal financial regulators, allowing entrepreneurs to test new products and services without sacrificing critical consumer protections.
“Technology has radically changed how consumers interact with the financial system, as well as how financial institutions interact with regulators,” said Chairman McHenry. “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road. That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets because we strike the right balance between fostering innovation and consumer protection—this bill will help ensure the United States continues to lead the world in financial innovation.”
Read the text of the legislation here.
Background:
The Financial Services Innovation Act would require federal regulators to create Financial Services Innovation Offices (FSIOs) within their agencies to foster innovation. Once established, companies may apply for an “enforceable compliance agreement” with the respective FSIOs that, if accepted, will allow them to provide an innovative product or service under an alternative compliance plan.
This legislation will establish a FSIO Liaison Committee tasked with facilitating the cooperation of each FSIO to ensure that agencies share information and data on petitions and consult with state regulatory entities to provide information and advice to the public with respect to financial innovations and agency regulation. Additionally, FSOC must submit a report on the aggregate impact of enforceable compliance agreements entered into under this bill. This includes the existing regulations or practices that are burdensome to innovation, restrict competition in the financial services industry, or that restrict improvements for consumers of financial products or services. The bill would also require FSOC to identify the overlap of agency regulations of financial products or services and issue recommendations for reducing, consolidating, or eliminating such overlap, among other reporting requirements.
The regulatory sandbox approach has proven successful in states like North Carolina, which launched its financial and insurance regulatory sandbox through the North Carolina Innovation Council in 2021.
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