InfoBytes Blog
Republicans seek answers from OCC on bank-fintech partnerships
On October 11, House Financial Services Committee Ranking Member Patrick McHenry (R-NC), joined by Republican members of the Task Force on Financial Technology, sent a letter to acting Comptroller of the Currency Michael J. Hsu asking for clarification on the OCC’s position regarding bank-fintech partnerships. The lawmakers asserted that the OCC previously “worked to provide banks and their customers with a clear understanding of the regulatory and supervisory expectations surrounding emerging products and services,” as well as how to properly assess risk, but contended that leadership under the current administration has not continued to do so. Citing the importance of innovation to the U.S. economy and the impact new financial products and services can have on costs, inclusion, and competition, the letter expressed concerns related to the potential for further uncertainty surrounding these partnerships and the resulting consequences for consumers. “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,” the lawmakers wrote, expressing their belief that the benefits from these partnerships far outweigh the risks. “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.”
Referring to an action taken by President Biden in June 2021, which repealed the OCC’s “true lender” rule pursuant to the Congressional Review Act (covered by InfoBytes here), the lawmakers asked the OCC whether it anticipates fintech partnerships ending as a result of potential regulatory changes, and questioned how the agency plans to “ensure that examiners do not discourage innovation through fintech partnerships” or “impose unreasonable burdens on banks and fintechs.” The letter also asked the OCC to respond to a series of questions, including, among other things, how it plans to determine the acceptable terms for bank-fintech partnerships, how it intends to analyze fintechs that are helping to bring the banking business into the digital era, and how examiners will evaluate a bank’s assessments of third parties’ cybersecurity risk management and resilience capabilities and whether such evaluations will “be carefully tailored to the actual risk posed by the particular bank-fintech partnership.”