Comptroller Under Fire for Special Bank Charter Proposal

Acting Comptroller of the Currency, Scott Brooks is under fire for seeking feedback on a proposal to offer narrow-purpose bank charters for activities such as payments—a plan that has been blasted as serving special interests, including one that formerly employed him.

Traditional banking industry trade groups, including the Credit Union National Association and the National Association of Federally-Insured Credit Unions, contend that Brooks’ proposal is ill-advised and was formed without using the proper regulatory process.

“The Office of the Comptroller of the Currency (OCC) is reviewing its regulations on bank digital activities to ensure that its regulations continue to evolve with developments in the industry,” the OCC said last month, in soliciting information about how financial technology has affected financial services.

The traditional banking industry trade groups said, in letters to the agency, that Brooks has publicly said that the OCC is considering a special bank charter for payments.

The Revolving Door Project at the Center for Economic Policy and Research, a public interest group, said that Brooks previously represented a company that lobbied the Office of the Comptroller, but that since Brooks is serving in an acting position, he is not bound by ethics agreements signed by other Trump Administration officials. They questioned whether Brooks should even serve in his role as a regulator.

Andrew Morris, NAFCU’s senior counsel for research and policy, said it is troubling that Brooks already has said that plans for financial technology charters are underway.  He said that those comments raise questions about the agency’s role as a prudential regulator.

NAFCU officials said that rather than providing special treatment for financial technology companies, regulators should work with traditional financial services providers to optimize their ability to use technology.

A narrow charter, such as one that covers only payments would represent a significant change in regulatory policy—one that should go through the regulatory process said Lance Noggle, CUNA’s senior director of advocacy and senior counsel for payments and cybersecurity.

“Although we appreciate the OCC’s forward-looking approach to technology, we are concerned that industry altering changes are being considered without sufficient public consideration of the subtle related regulatory and business dynamics,” he said.

While the traditional banking trade groups are concerned about the proposal, the new financial technology trade groups say such regulations are needed.

The financial regulatory structure moves slowly, noted Jo Ann Barefoot, CEO of the Alliance for Innovative Regulation. “Technological change moves at exponential speed, while regulatory change, and much of the change in the banking system, typically has a linear pace,” she said, in commenting on the OCC solicitation. “This mismatch is producing a widening expanse of risk as the industry’s innovation increasingly outstrips regulators’ capacity for response.”

An official of the Chamber of Digital Commerce, another financial technology trade group, agreed that regulations must keep pace with technology.

“The bank regulatory environment should promote economic growth, foster the development of new technology and financial services innovation, and reflect technological advances in the industry while also ensuring that financial services are provided broadly, fairly, and in a safe and sound manner,” said Amy Davine Kim, chief policy officer at the Chamber of Digital Commerce.

Opposition on a procedural front comes from The Revolving Door Project at the Center for Economic Policy and Research, a public interest group. The group noted that since Brooks is serving in an acting position, he is not bound by ethics agreements signed by other Trump Administration officials.

Executive Director Jeff Hauser said that prior to joining the OCC in April, Brooks was the chief legal officer at Coinbase, a cryptocurrency exchange which previously lobbied the office for a national bank charter.

And since he is serving in an acting capacity, Brooks could issue a rule that benefits his former employer, only to return to the company when he leaves the OCC, according to Hauser

“In light of Brooks’ lack of transparency and unmitigated conflicts of interest, there is no way for this rulemaking process to earn the public’s trust while Brooks remains at the helm,” Hauser said. “We strongly suggest that the matter be closed until such time as a permanent official who lacks Brooks’ many conflicts be confirmed.”


Office of the Comptroller of the Currency to Issue Charters to Payment Companies

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