Credit union trade groups this week accused Acting Comptroller of the Currency Brian Brooks of skirting the rulemaking process in an attempt to allow risky fintech companies to expand their services.
“Credit unions are concerned that non-regulated companies are engaged in financial activities by offering products and services that are traditionally offered by credit unions and banks,” CUNA President/CEO Jim Nussle told the House Financial Services task force on financial technology. “These non-bank providers often strive to offer these products and services without being subject to robust consumer protection laws and regulations in place for banks and credit unions.”
Nussle and NAFCU Vice President of Legislative Affairs Brad Thaler told the task force that Brooks is helping those companies by saying he wants to expand the bank chartering process without adopting new rules.
The task force held a hearing on the expansion of fintech companies on Tuesday.
In their letters, Nussle and Thaler noted that Brooks has said that he has the power to issue charters to companies that handle only payments without going through the rulemaking process, which includes public comment on proposed rules.
“The Acting Comptroller introduced the payments charter informally, without notice and comment, and then determined—after hearing from a coalition of financial services trades that a transparent rulemaking should be preferred—that a discrete proposal was not required,” Thaler wrote.
Nussle said that Brooks is proposing changes that would make it easier for non-bank lenders and payment companies to bypass consumer protection rules. He said, for instance, some fintech companies are exploiting loopholes in regulations to enter partnerships with banks and leveraging the bank’s regulatory structure.
He said that CUNA opposes the payments charter, adding that the group believes that the Office of Comptroller of the Currency should undertake “an open and transparent” process in considering new charters.
Thaler said that NAFCU has cautioned that “frameworks designed to encourage innovation must not favor certain market participants at the expense of others.”