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On July 31, 2018, the Office of the Currency Controller ("OCC") announced that it would start accepting domestic bank card requests from Fintech entities that are engaged in the business of banks that do not accept deposits. This follows the announcement by the OCC in December 2016 to explore national bank cards with special purposes for these entities and to raise awareness of the OCC with stakeholders.
The OCC's chartering authority includes the authority to establish "special purpose national banks", such as trust banks and credit card banks. A national special purpose bank must perform at least one of the following functions: fiduciary business, receiving deposits, paying checks or lending money. Fintech entities engaged in such activities are granted the option to apply for a national bank card for special purposes.
The Fintech national bank card is an "opt in" regime. Fintech entities are offered the possibility to apply for Fintech national credit cards if they decide to do so, but are not obliged to do so. Fintech entities retain the ability to choose other facilities such as state bank cards or other types of licenses (for example, money transfer licenses or lender licenses).
Requirements for the Charter
The admissibility of technology companies to apply for national credit cards, the OCC has confirmed that the existing rental standards and procedures they will apply to the requests of the Fintech entities and that the OCC will consider "if a proposed bank has a reasonable chance of success, will be operated in a safe and sound manner, provide fair access to financial services, treat customers fairly and will comply with applicable laws and regulations. "
The OCC has emphasized that a company that receives a Fintech card" will be subject to the same high standards of safety, solidity and fairness that all federally federated banks must abide by "," also in relation to capital, liquidity and management risk. "The OCC also indicated that candidates will be required to" demonstrate a commitment to financial inclusion "to be approved. In addition, applicants must present an emergency plan (biological testament) that addresses financial stress.
The OCC also reiterated that it will not approve applications contrary to applicable law, that existing restrictions on the type of business that a bank can conduct will remain applicable and will not accept applications that include services or products that have " predatory, unfair or misleading characteristics or which represent an undue risk to consumer protection ".
Opposition of State to the Fintech National Charter
US state financial regulators had generally expressed opposition to the concept of a national bank card for Fintech entities when they first proposed, as seen in a letter from the New York State Department of Financial Services ("NY DFS") to the OCC. The state regulators presented a judicial challenge to the initial proposal for a Fintech card by the OCC, which was rejected by the courts as premature.
In response to the announcement of July 31, 2018, the NYDFS issued a press release stating that it "strongly opposes [the] the decision by the Office of the Currency Controller to initiate accepting domestic bank card requests from non-financial financial companies (fintech) DFS believes that this effort […] is not clearly authorized by the national bank law. "
Canadian implications
Currently not there is no equivalent concept in Canada for "special purpose national banks" and Bank Act generally deals with banks that are chartered in Canada that carry out limited activities in the same way as those that are full service banks. Introducing a similar concept in Canada would be a significant change for the Bank Act .
Like the United States, the regulation of financial services in Canada embraces both the federal and the provincial sphere. According to the Canadian constitution, "banking" and "incorporation of banks" are exclusively under federal jurisdiction, while "property and civil rights in the province" are under provincial jurisdiction (resulting in the number of areas of law that govern Fintech entities such as securities law, consumer protection laws, etc. that fall within the provincial jurisdiction). As a result, extending the scope of federal jurisdiction to Fintech entities in Canada through a Fintech national card could also trigger similar tensions between federal and provincial legislators.
