The new head of a U.S. banking regulatory agency on Wednesday defended his predecessor’s efforts to explore granting special federal charters to startup online lenders.
The Office of the Comptroller of the Currency (OCC) has been facing pressure from state regulators ever since it announced last year that it would consider granting charters to so-called “fintech” lenders.
But Keith Noreika, who took over as the OCC’s acting head in May, sounded like his predecessor, Tom Curry, in defending the agency initiative and billing it as good for the United States; banking system.
With Republican President Donald Trump’s appointees eagerly looking for ways to reduce the federal government’s regulatory footprint, Noreika’s comments marked rare common ground between a new official and the appointee of Democratic President Barack Obama who he replaced.
Noreika’s comments also made clear that the OCC initiative exploring special fintech charters is not falling by the wayside with the new administration.
“Quite simply, I think it is a good idea that deserves the thorough analysis and the careful consideration we are giving it,” he said in prepared remarks.
The OCC announced it was exploring granting special-purpose charters to fintech companies in December.
Noreika said in his remarks that while the OCC has met with companies exploring seeking a national charter, it is not currently considering any specific requests from nondepository institutions, and did not guarantee the OCC would eventually do so.
But he defended the agency’s ability to explore the issue, even as the OCC faces a pair of lawsuits from state regulators who argue it infringes on their ability to regulate similar entities.
New York’s banking regulator, as well as a nationwide organization of bank supervisors, have sued the OCC. The pending lawsuits argue that the OCC lacks the authority to grant those special national charters, and could allow companies to push higher interest rates and skirt consumer protection laws by escaping stricter state regulations.
But Noreika dismissed such a challenge, saying it is clear the OCC has the authority to grant bank charters to nondepository fintech companies, while adding that nothing about the OCC’s actions should allow firms to duck appropriate regulatory scrutiny.
“The agency is developing its litigation response and plans to defend this authority vigorously,” he said.
Rather, Noreika maintained that fintech companies should be able to explore a national charter to do business as well as state ones. He added that such charters could actually aid banks, given that it would subject these new competitors to the same regulatory framework they must abide by.
And he defended the OCC’s work as a potential regulator of fintech activity, pushing back against state complaints that the agency would be a weaker regulator than them.
“Where large-scale, short-term, consumer lending abuse occurs today, it does so through state-licensed and state-regulated companies, not national banks or federal savings associations,” he asserted.