January 17, 2017 — Comments

The National Consumer Law Center (on behalf of its low-income clients) and Consumer Federation of America, Consumers Union, Main Street Alliance, and U.S. PIRG thank you for the opportunity to comment on the Office of the Comptroller of the Currency’s (OCC’s) white paper on Exploring Special Purpose National Bank Charters for Fintech Companies.

We appreciate the OCC’s desire to foster financial innovations that make financial products and services more accessible, easier to use, and more tailored to individual consumer needs. We also note your genuine commitment to responsible innovation, safety and soundness, and consumer protection.
However, because of the substantial harm that will undoubtedly result from a new special purpose national bank charter, we strongly oppose this proposal. We urge the OCC to reconsider this position and withdraw the proposal.

First, we do not believe that the OCC has the authority to create a new class of “national banks” that do not take deposits and do not have deposit insurance. The OCC’s interpretation that it can charter any company that lends money or is involved in payments is a dangerous expansion that upends our federalist system.

Second, enabling a new class of companies to be considered “national banks” would allow these companies to ignore state interest rate caps, state consumer protection laws, and state oversight to the great detriment of consumers. States play a vital role in protecting consumers and small businesses and have many protections that are absent on the federal level. The OCC should not supplant the role of the states.

Safety and soundness and federal consumer protection supervision by the OCC simply does not and cannot substitute for the critical safeguards provided by state interest rate caps and other specific state laws that do not have counterparts at the national level. Maintaining state consumer protection cops on the beat is also critical, as federal agencies cannot vigilantly protect consumers in all fifty states nearly as effectively as local agencies can. State agencies are closer to the people of their respective states, more nimble, and able to react quickly when local problems first arise. We understand that the OCC could place conditions on the national bank charters that it issued to fintechs and other non-banks.

In Section 4 of these comments we spell out the conditions that the OCC should impose if it decides to grant charters. However, these conditions would not even come close to countering the damage caused by preemption of state laws, the eradication of private rights of action, and the exemption from state oversight.

In these comments, we attempt to provide a comprehensive explanation of why the OCC cannot and should not proceed with this charter: