Opposed to fintech charter, NYDFS digs in

Reinforcing prior statements in opposition to the Office of the Comptroller of the Currency's proposal to establish a new limited-purpose national bank charter for financial technology (fintech) enterprises, the New York State Department of Financial Services, in a March, 15, 2017 press release, voiced strong opposition to the plan, calling fintech an "amorphous category."

In a Jan 13, 2017, comment letter to U.S. Comptroller Thomas J. Curry, New York State Financial Services Superintendent Maria T. Vullo stated the OCC's proposal would bypass state consumer protection laws and create "regulatory arbitrage." New York's Department of Financial Services is better equipped to regulate "cash-intensive nonbank financial service companies" by providing strict oversight and enforcing anti-money laundering, consumer identification and transaction monitoring, she said.

The NYDFS's latest statement on the topic declared the "imposition of an entirely new federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape will invite efforts to evade state usury laws and other consumer protections, stifle small business innovation, create institutions that are too big to fail, and increase the risks presented by nonbank entities."

The agency also disputes the OCC's claim that it has authority under the National Bank Act to establish a new charter category without congressional authorization. "Nonbank financial institutions are not national banks nor are they similar to the entities encompassed by the National Bank Act," the NYDFS said.

In addition, the NYDFS believes a new type of charter would not be necessary because effective state regulators are in place in all 50 states. "The proposal threatens to create an entirely new federal regulatory program, creating serious regulatory uncertainty that threatens to invade state authority and sovereignty," the NYDFS stated, adding that it already regulates money transmitters, check cashers, virtual currency exchanges, and other nondepository institutions to protect the public against money laundering, terrorist financing, and cyber threats.

The NYDFS also said it will continue "to protect the sovereignty of New York by enforcing state laws and protecting consumers."

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