Banking

OCC, not CFPB, should grant fintech charters, Brooks says

Acting Comptroller of the Currency Brian Brooks pushed back against the recommendation of a task force that the Consumer Financial Protection Bureau — and not the Office of the Comptroller of the Currency — should issue federal charters to fintech companies.

In a statement Wednesday, Brooks held firm that the OCC retains chartering authority, describing the OCC and CFPB as “two cops on the beat” with separate responsibilities.

“Under the law, the agency that grants national charters to companies engaged in lending, payments, or deposit-taking is the Office of the Comptroller of the Currency,” said Acting Comptroller Brian Brooks.

“Under the law, the agency that grants national charters to companies engaged in lending, payments, or deposit-taking is the Office of the Comptroller of the Currency, which has the responsibility for prudential supervision to ensure these chartered institutions operate in a safe, sound, and fair manner,” Brooks said in the statement. “In its wisdom, Congress in the Dodd-Frank Act separated chartering and prudential supervision from consumer protection enforcement, assigning chartering authority to the OCC and specific consumer protection enforcement authority to the CFPB.”

A task force appointed by the CFPB released a report Tuesday with 102 recommendations to Congress and policymakers that it said would strengthen consumer protections and encourage competition. The leading recommendation was that Congress authorize the CFPB to issue federal charters or licenses to nonbank fintechs or “clarify the authority of the OCC” to do so.

It is unclear whether the task force’s recommendations will have any impact. Once President-elect Joe Biden takes office on Jan. 20, he can fire both Brooks and CFPB Director Kathy Kraninger and appoint his own agency heads.

Brooks praised some of the task force’s report and appeared to agree that nonbank fintechs that offer similar products and services as banks should be able to operate under the same rules.

“The thoughtful report by the task force created by the CFPB concludes that the nation needs federal charters for fintechs to effectively, efficiently, and safely serve the financial needs of consumers across the nation under a single uniform set of rules,” he said. “We absolutely agree with that conclusion.”

After the 2008 financial crisis, Dodd-Frank created the CFPB but separated the responsibilities of the consumer agency from those of prudential regulators.

“The additional protections implemented following the last financial crisis put two cops on the beat and separated those responsibilities so neither would be compromised in service to the other,” Brooks said. “That dynamic should be preserved so that the CFPB continues to enforce compliance with enumerated financial consumer protection laws for the financial companies designated by the Dodd-Frank Act, while at the same time avoiding the creation of a prudential supervision gap that could lead to serious safety and soundness risks.”


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