Page 12 - GS170201

News

navigating state-by-state requirements can be costly and access to capital allows small businesses to invest in
time-consuming for startup companies. A national charter their employees, purchase more inventory, expand their
would enable a money transfer company to apply once services, and ultimately grow their businesses," he wrote.
and be covered throughout the United States."
States' rights
Far-reaching proposal
In a separate letter, also dated Jan. 17, 2017, the New York
The OCC's Exploring Special Purpose National Bank Charters State Department of Financial Services (DFS) urged the
for Fintech Companies contains a far-reaching proposal OCC to respect New York State laws for money transmitters,
that examines the agency's role as chartering authority, online lenders and virtual currency exchanges, which
both historically and organically, as the office evolves have been in place for decades. The department also
in response to emerging financial technologies. The called on state regulators, legislators and policymakers
150-year-old OCC strives to remain relevant in the digital to oppose the OCC proposal in favor of retaining a state-
age, publishing guidance designed to balance innovation based regulatory system.
with protecting established, financial infrastructure.
"The National Bank Act does not provide the OCC with
The agency feels it has established rigorous standards authority to create this new proposed charter," Vullo
for entities applying for special purpose banking wrote. "The proposal threatens to create an entirely new
charters. Applicants must submit "a detailed business federal regulatory program, creating serious regulatory
plan, governance, capital, liquidity, compliance risk uncertainty that threatens to invade state sovereignty
management, financial inclusion, and recovery and and embolden those who may seek to evade strong state
resolution planning," the OCC stated. The OCC has consumer protection laws."
offered to meet with prospective applicants to discuss
requirements. Vullo feels that a national charter might even stifle
innovation by enabling large firms to dominate the
"The OCC expects any applicant seeking a special financial services sector, to the detriment of existing banks
purpose national bank charter to provide a sufficient and small business startups. "A national charter would
description of the proposed bank's activities for the OCC encourage large 'too big to fail' institutions, permitting
to fully understand the BSA/AML and compliance risks a small number of technology-savvy firms to dominate
the proposed bank faces, how it intends to assess, manage, different types of financial services simply because they
and monitor these risks, and how it would comply are able to get a national charter," she wrote.
with relevant laws, regulations, and requirements," the
proposal's authors wrote. Vullo went on to note that the proposal could create
"regulatory arbitrage" by enabling companies to sidestep
Financial inclusion state consumer protection laws. "State regulators like DFS
The OCC's interest in financial inclusion, defined by are experienced and therefore better equipped to regulate
The World Bank as conditions in which "individuals and cash-intensive nonbank financial service companies,
businesses have access to useful and affordable financial which requires strict oversight and enforcement of
products and services that meet their needs ‒ transactions, anti-money laundering, consumer identification and
payments, savings, credit and insurance ‒ delivered in a transaction monitoring statutes and regulations," Vullo
responsible and sustainable way," aligns with goals on the stated.
part of many payments industry and financial services
leaders to expand financial inclusion. Retail, payments find

The Electronic Transactions Association stated that
made financial services widely available through mobile unity at NRF 2017
fintech is naturally focused on financial inclusion and has
apps, online applications and a range of free and low-
cost digital services. "These products and services have he National Retail Federation's 106th Annual
also expanded, and are continuing to expand, financial Convention and Expo, held Jan. 15 to 17, 2017
opportunities for underserved consumers," wrote Scott at Jacob Javits Convention Center in New York
Talbott, ETA Senior Vice President of Government Affairs T City, reflected the retail and payments indus-
in a Jan. 17, 2017 letter to the OCC. tries' diverse community of global enterprises and start-
up ventures. Approximately 33,000 attendees, 510 exhibi-
Talbott further noted the role of nontraditional finance tors and 300 speakers participated in the show, which
companies in providing lines of credit to small business included 70 educational sessions.
owners, creating new opportunities for borrowers and
lenders. "It's clear that online small business lending is In a keynote address, Kip Tindell, NRF Chairman and
reaching a broad market, and that providing quicker co-founder and Chairman of The Container Store Group

12