A handful of trade groups representing banks and credit unions spoke out against the Office of the Comptroller of the Currency’s (OCC) plans to create a special banking charter for payments companies.
Previously, acting comptroller Brian Brooks told the American Bankers Association (ABA) last month that the OCC plans to unveil a national money transmitter license that would offer nonbank payment companies “a national platform with preemption.” This means that nonbank payment companies would have to obtain a money transmitter license from each state in which they operate.
In a letter to Brooks, sent later in July, the group—which comprises ABA, Bank Policy Institute BPI, Consumer Bankers Association CBA, Credit Union National Association, Independent Community Bankers of America ICBA, National Association of Federally Insured Credit Unions, and The Clearing House—said they “have serious concerns” regarding the “narrow-purpose payments charter.”
It continues: “These charters could introduce serious risks that would undermine the valuable role that national banks play in our dynamic economy. We believe that a payments-focused charter introduces serious unintended consequences.”
The group added that, in 2016 when the OCC proposed its lending-focused Special Purpose National Bank “fintech” charter, many of its members noted the “importance of existing rules and oversight being applied consistent with those for any national bank.” However, the group “raised questions about how regulations would be tailored to new business models and whether oversight would be consistent to that of other banks.”
“Answers to many difficult policy questions should be reached before considering any individual special purpose charter application, including how to ensure that regulations and consumer protection are applied evenly; what protections must be in place to preserve the existing separation of banking and commerce; and to ensure even application of OCC policy objectives, including those related to financial inclusion and CRA responsibilities,” the letter reads.
Brooks responded to some of the groups concerns in a webinar, also in late July. “There will be no less transparency process here than there is with respect to the bank charter I signed this morning,” ge said. “This is what we do here. We grant bank charters. We review applications pursuant to a set of rules. When the banks meet the rules, we grant the charter. I don’t think there is a lack of transparency.”
He envisions the payments charter would work in such a way that if a company does a qualifying activity—deposit taking, lending or payments—as its primary activity, then it can be a bank. Said Brooks: “Not a special-purpose bank, but a bank with all the things that come with that. That includes capital rules, it includes [Bank Secrecy Act] compliance and community reinvestment-like requirements for financial inclusion.”