ABA, others want a say in OCC's payments charter plan

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In the same manner as its previous plans for a fintech charter, the Office of the Comptroller of Currency is getting some pushback from banking trade groups on its idea to establish a payments charter.

The American Bankers Association and six other financial trade groups, sent a letter Wednesday to the OCC to open up discussions about a potential payments charter before diving too much further into the concept of payments providers being able to obtain bank charters.

Last month, OCC Acting Comptroller Brian Brooks said he was pushing for a payments charter that would allow companies like PayPal, Stripe and possibly cryptocurrency companies to consider a bank charter, which essentially permits a company to operate a specific aspect of business as a bank. It would include incorporation and a certificate of incorporation, while specifying the rights of a banking institution.

Brooks indicated he had the idea on a fast track, hoping to have applicants seeking the new charter within the next few months. His basic premise was the OCC's belief that "a bank is anything that takes deposits and makes loans, or engages in payments."

The Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions and The Clearing House joined ABA in adding their names to the letter addressed to Brooks.

The OCC confirmed it had received the letter, but was not prepared to make a statement regarding its contents. "We will take the time to read it and consider the thoughtful comments the trades have shared on behalf of their members," said Bryan Hubbard of OCC Public Affairs.

In addition to citing the need for more open discussion, the letter also stressed the importance of applying bank holding company oversight to the process.

“Specifically, we encourage the OCC to continue to proceed carefully, deliberately, and transparently as it has throughout its deliberations on new charters," the letter stated. "The issues being considered have broad implications for the banking system and longstanding policy determinations. Any change being contemplated should be subject to robust public comment well before considering a new charter.”

On the topic of bank holding company oversight, the bank organizations noted it would reflect "Congress's policy determinations regarding oversight and supervision of holding companies that engage in activities beyond the bank subsidiary."

Any change to this balance, the letter noted, would represent a significant policy change. "We believe that such a significant policy change should be subject to scrutiny in the public notice and comment process, and not simply by issuing a special purpose national charter.”

The Office of the Comptroller of Currency has endured some legal challenges and plenty of questions the past four years regarding its idea to establish a special charter for non-bank fintech companies to access a nationwide financial system for lending — without the need to be licensed in all 50 states to provide that service.

The groups reminded Brooks that they also expressed concern about that proposed fintech charter, saying they stressed the importance of existing rules and oversight being applied consistent with those for any national bank.

Generally, the groups were concerned that a bank charter sends a "clear signal to customers that the consumer is dealing with a trusted partner" and that any fintech receiving one would receive instant credibility.

"Any misstep by a fintech operating through a national bank charter will inevitably reflect on all banks," the letter stated.

The joint trades groups, while expressing concerns about the "narrow purpose" of the payments charter, also praised the current and past innovations in financial services, saying it has had "tremendous potential to benefit customers, as they have throughout banking history."

The letter praised the benefits of innovation, but cast a wary eye on how such innovation could be delivered. The benefits take hold, it said, when innovation is delivered responsibly "in a way that does right by customers."

"Regulation must be flexible enough to allow innovations to be driven from within traditional banks," the groups said. "We must also ensure that customers receive the protection they deserve whenever they get their financial services through consistent regulation and oversight."

The ABA had no other comment beyond the contents of the letter, though spokesperson Sarah Grano reiterated that the organizations "have serious concerns about the proposed narrow-purpose payments charter and the significant implications it would have on the banking industry."

The groups hope for "an open, transparent process that includes public notice and comment," she added.

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