OCC payments charter quickly generates industry concern

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As we reported, Acting Comptroller of the Currency Brian Brooks has previewed the OCC’s plans to introduce another special purpose national bank charter that would give payment companies a nationwide servicing platform and federal preemption of state laws regarding licensing and regulation of money transmitters and payment services providers.  Acting Comptroller Brooks’ statements drew swift reaction in the form of a July 29, 2020 letter from seven leading banking trade associations.

Recognizing the role of technological innovations for financial services, the trade associations stated their belief that “when banks and technology companies partner, they can deliver customers the best of both worlds: innovative services that customers demand from a partner that they can trust with their financial future.”

The trade associations expressed serious concerns regarding the “narrow-purpose payments charter” and “encourage[d] the OCC to continue to proceed carefully, deliberately, and transparently as it has throughout its deliberations on new charters.”  In particular, the trade associations expressed concern whether an entity that owned a narrow-purpose payments charter would be deemed a bank holding company, subject to regulation and oversight under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and Federal Reserve Board Regulation Y.  In their letter, the associations acknowledged that holders of limited purpose charters in the past have a specific exemption from “bank” status under the BHCA, but argued that “no such specific exemption exists for the special purpose charter under consideration by the OCC, and the Federal Reserve Board has not yet publicized its views on the potential application of the BHCA to such a charter.”

Finally, the associations noted the recent legal challenges to the OCC’s authority to issue a special purpose national bank charter for fintech companies and stated that they “would oppose any effort by the OCC to offer a narrowly focused payments charter.”  We will be discussing the OCC’s proposed payments charter in an upcoming Consumer Finance Monitor Podcast.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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