In prepared remarks at the “Global Interdependence Center’s Payment Systems in the Internet Age” Conference, Philadelphia Fed President Patrick T. Harker said that regulating the evolving FinTech industry benefits not only consumers, but also the innovators. While Harker did not speculate as to whether the Fed will become involved in FinTech regulation, he stated that it is in the best interest of FinTech companies “to have an established framework in which to operate.” He cautioned, however, that “all financial systems are a matter of trust” and thus FinTech firms will “need that trust the same as any other bank or financial institution.” Harker noted that regulations will help determine which companies can survive the “down side” of a credit cycle, but implementing regulations after a “crisis. . . could mean tighter strictures and less room for innovation.”
FTC Issues Summary of ECOA Enforcement and Educational Activity to CFPB as Bureau Prepares Annual Report
On February 3, the FTC provided the CFPB with an overview of its work on ECOA-related policy issues, focusing specifically on the Commission’s activities with respect to Regulation B. The letter discusses, among other items, the Commission’s fair lending research, policy development and educational initiatives such as (i) surveying consumers about their experiences in buying and financing automobiles; (ii) providing a report to businesses to help them avoid exclusionary or discriminatory outcomes when using big data analytics; (iii) creating a FinTech forum series that explores emerging financial technology and its implications for consumers; (iv) issuing a report to Congress on Commission efforts in African American and Latino communities related to fraud prevention; (v) hosting a workshop to examine marketplace changes based on population changes and diversity trends; and (vi) attending Interagency Task Force on Fair Lending meetings to share information on lending discrimination, predatory lending enforcement, and policy issues. The letter also discusses the Commission’s business and consumer education efforts on fair lending issues.
On January 23, the CFTC extended the comment period for the supplemental proposal for Regulation Automated Trading (Regulation AT) from January 24 to May 1. Acting CFTC Chairman Chris Giancarlo recently announced his intention to “allow more time for public comments on the proposal” in light of “the complexity of the supplemental notice and the well-reasoned requests from interested parties.” Initially proposed in November 2015, the CFTC released a revised version of the rule in November 2016 in response to concerns expressed by trading firms over, among other things, the requirement that they make their source code available to the agency without a subpoena. All comments will be posted on the CFTC’s website.
On January 17, the OCC launched the first phase of its Central Application Tracking System (CATS), a new web-based system for banks to file licensing and public welfare investment applications and notices. CATS provides a secure, electronic system through which authorized national banks, federal savings associations, federal branches, and banking agencies may draft, submit, and track their licensing and public welfare investment applications and notices. CATS will replace the existing e-Corp and CD-1 Invest application tools. As explained in OCC Bulletin 2016-37, the new program is being launched in three phases to help banks transition from the existing tools. The second and third phases of the CATS rollout are scheduled to begin in the spring of 2017. When ready, CATS will be accessible through BankNet, the secure portal for OCC-regulated banks.
On January 17, the New York Department of Financial Services (NYDFS) Superintendent Maria T. Vullo submitted a comment letter in stern opposition to the OCC proposal to create a new FinTech charter, stating that the proposed regulatory scheme is not authorized by federal law and would create a number of problems, including a serious risk of regulatory confusion and uncertainty. New York’s top financial regulator is of the opinion that “the OCC should not use technological advances as an excuse to attempt to usurp state laws.” More specifically, NYDFS’ contends, among other things, that: (i) state regulators are better equipped to regulate cash-intensive nonbank financial service companies; (ii) a national charter is likely to stifle rather than encourage innovation; (iii) the proposal could permit companies to engage in regulatory arbitrage and avoid state consumer protection laws; and (iv) a national charter would encourage large “too big to fail” institutions, permitting a small number of technology-savvy firms to dominate different types of financial services.
An interview of Superintendent Vullo discussing this topic may be accessed here.