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US OCC And CFPB Butting Heads: Disagreement Over Fintech Charters

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Brian Brooks stands as the US Office of the Comptroller of the Currency’s (OCC) Acting Head, and had formerly been Coinbase’s, Chief Legal Officer. Today, Brooks has given out a warning urging against the Consumer Financial Protection Bureau (CFPB), particularly its goals of gaining the right to grant so-called “Fintech Charters.”

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It was earlier this week when the Taskforce on Consumer Financial Law of the CFPB gave out a report. This report detailed a total of 102 recommendations to policy, with the stated intent of strengthening and improving the overall financial regulations in the US.

One of the more prominent recommendations of that is the granting of powers to the CFPB to federally charter non-depository institutions. The phrase “non-depository institutions” classify any financial firm that does not take deposits from its customers, instead of collecting fees for various other financial services.

The problem comes with the OCC, particularly under the leadership of Brooks. The OCC had established a Special Purpose Payments charter dedicated to Fintechs, doing so in 2020. This, in turn, allowed for select crypto firms to apply to be recognized as a national bank, with big players like BitPay and Paxos applying and seeking approval to charter under this new regime back in December.

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A Potential Conflict In Regulations

Now, if the CFPB also has the right to charter fintechs extended to it, regulatory clarity could take a solid hit. These two regulators giving the same charter will make non-depository crypto firms uncertain as to which agency to apply to, with possible overlaps within the various mandates of each agency’s charter.

The Acting Head of the OCC gave out a statement on the 6th of January, 2020. In this statement, he pushed against the request for the CFPB to charter fintechs. He warned that legislation intended to keep these two agencies’ regulatory responsibilities separate would be jeopardized through this move, something in practice since the Financial Crisis of 2008.

Keeping Things Separate And Clear

Brooks highlighted that Congress had separated prudential supervision and chartering from consumer protection enforcement within the Dodd-Frank Act. With this Act, Congress had given the OCC chartering authority, allowing the CFPB to prioritize consumer protection enforcement authority.

As such, Brooks advocated the preservation of this dynamic instead of trying to mess with it, thus ensuring no overlap in regulatory responsibilities. In his argument, with the two regulators’ responsibilities cleanly separated, neither firm could suffer a compromise in service to one another.

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