The Office of the Comptroller of the Currency (“OCC”) is embarking on a dual-track regulatory effort that may result in a comprehensive overhaul of the relationships between the fintech industry and regulated financial institutions. On the first track is the OCC’s proposal to allow fintech companies to obtain Special Purpose National Bank (“SPNB”) charters. On the second track is the OCC’s enhanced scrutiny of banks that partner with third-party entities, in particular fintech companies. This regulatory effort may alter the now-common practice of large financial institutions, including banks subject to OCC regulations, partnering with fintech companies. Specifically, agreements between banks and marketplace lenders for the purchase of loans originated through the marketplaces as a means of obtaining funding for additional lending on the marketplace.
As explored below, the calculus underlying these relationships may begin to change as the OCC and FDIC recently have moved to increase their oversight of the relationships between banks and fintech companies. The confluence of both increased regulatory oversight of bank relationships with fintech companies and the potential to use chartering as a means of alleviating regulatory scrutiny may cause banks to prefer certain institutions. Such bank preferences may lead some fintech companies to obtain a charter in order to obtain access to capital at competitive rates while causing other companies to tailor their operations to more discrete products and geographic locales.
The OCC’s Proposed Fintech SPNB Charter
In December 2016, the OCC released its paper Exploring Special Purpose National Bank Charters for Fintech Companies, which proposed that SPNB Charters would be available for certain eligible fintech companies. The release of this proposal has resulted in intensive speculation as to its impact on existing fintech business models and, as evidenced by a lawsuit filed in April 2017 by the Conference of State Bank Supervisors, the authority of the OCC to even issue SPNB charters.
In March 2017, the OCC furthered the SPNB process by releasing its draft fintech licensing manual. Under the proposed guidelines, the OCC will consider, among other things, whether the entity seeking a charter: