The National Consumer Law Center®, on behalf of its low income clients, Center for Responsible Lending, Empire Justice Center and U.S. Public Interest Research Group appreciate the opportunity to submit these comments in response to the Office of the Comptroller of the Currency’s request for comments on how to support responsible financial innovation.
Our comments begin with our reaction to the OCC’s white paper. We appreciate the OCC’s emphasis on supporting “responsible” innovation. Innovation in the financial sector can broaden financial inclusion, address unmet needs, and make financial products and services better, safer and more affordable. But innovation is not a uniformly positive thing. “Innovative” products and services need to be reviewed with a critical eye and carefully monitored.
Support for innovation should never be at the expense of consumer protection regulations. Even responsible innovations need to be covered by critical consumer protection laws – laws that may need to be updated to close gaps or address new issues.
Consumer protection must be at the forefront of innovation, not an afterthought. Problems are much easier to avoid and address when close attention is being paid as new products are designed and new markets are developing. After problems become an entrenched part of a business model, they are much more difficult to root out. Reacting quickly to address problems can also help industry by weeding out bad actors and promoting consumer confidence. Responsible innovation is also supported by the flexibility of laws against unfair, deceptive or abusive acts or practices, which give regulators the ability to address problems before they are widespread or concrete enough to write a rule applicable to an entire industry.
Bank-fintech partnerships can bring innovation to financial services and promote financial inclusion. But partnerships should not be used to evade state consumer protection laws, and we oppose a federal charter for fintech companies. Fintech companies also need to be supervised directly, in addition to the indirect supervision they may receive through bank regulators.
A centralized office within the OCC to monitor innovation could be helpful, but it must have a core consumer protection mission. It should not primarily be an advocate for companies that are looking to loosen consumer protection regulations.
In the remainder of our comments, we will summarize lengthier comments that some of our organizations have submitted earlier to the OCC or other agencies about specific areas of innovation:
- Marketplace lending and big data;
- Mobile financial products and services;
- Modernization of the Community Reinvestment Act and the role of bank branches;
- Payment fraud and faster payments;
- Virtual currencies; and
- Interchange fees on prepaid cards.