OCC National Payments Charter

“Version 1.0” of the Office of the Comptroller of the Currency’s (OCC) Payments Charter—which would be “a national version of a state money transmission license”—could be unveiled as early as this fall, according to OCC Acting Comptroller Brian Brooks. “Version 2.0” of the Payments Charter, he said, would involve chartered companies having direct access to the Federal Reserve System, could be rolled out approximately 18 months later.

Brooks shared the details in the June 24, 2020, episode of the American Bankers Association’s Banking Journal Podcast. He had been floating the idea around for several weeks prior to the interview.

In the podcast, Brooks said that payments companies offering services on a global basis should have access to a single national licensing and regulatory authority, like the OCC, adding that the advantage of obtaining a Payments Charter would be to have “a national platform with preemption, plus the prestige of having the supervision of the OCC, which gives customers a lot of confidence in [the company’s] platform.” The Payments Charter would likely be offered as a new type of special purpose national bank (“SPNB”) charter and would be expected to gain interest from state-licensed money transmitters, as well as payment processors and financial technology (“fintech”) companies that do not take deposits.

Regarding Version 2.0, which would involve direct access to the Federal Reserve System (Fed), Brooks says that the Federal Reserve Board, after observing the OCC’s supervision and regulation of the Payments Charter for a length of time, will become increasingly comfortable with the idea of such companies having access to it. He added, however, that even without access to the Fed, companies with a Payments Charter will obtain valuable benefits for the reasons discussed above.

Brooks also touched on some issues that the OCC is currently considering, including supervision, safety and soundness and financial inclusion requirements. Specifically, his office is considering how to impose capital standards on payments companies that do not generally bear any credit risk, though they do have momentary exposure to payments flows as they cross their platform. Though companies that would obtain Payments Charters would generally not be involved in deposit-taking activity (and, as a result, would not be subject to Community Reinvestment Act requirements), Brooks noted that “these charters will have some kind of financial inclusion expectation,” particularly if and when they are granted direct access to the Fed.

The Payments Charter would be a different SPNB charter than the OCC’s previously proposed SPNB charter for fintechs, which contemplated the ability to lend money in addition to engage in payments activities. The “fintech charter” has been subject to litigation from state regulatory authorities and, since late 2019, the OCC has been blocked from granting such charters as a result of a judgment in favor of the New York Department of Financial Services against the OCC, which is currently under appeal in the Second Circuit. 

Further, state banking regulators are currently coordinating on a revised, state-based regulatory regime to address similar concerns the OCC is attempting to address. The success of the OCC’s Payments Charter proposal may depend on the scope of the proposal and the extent to which the OCC obtains buy-in from the industry. 

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