Customers deserve the same level of protection whether they do business with nonbank payment startups or banks, ABA President and CEO Frank Keating said in an American Banker op-ed today. Keating was responding to arguments by former Treasury Secretary Larry Summers that nonbanks are at a regulatory disadvantage.
“Banks provide extensive protections to consumers on all of the products and services they offer,” Keating said. “But many new technology-focused companies offer little in the way of consumer protection. They do not have to establish ability to repay before making loans or offer protection from unauthorized payments. This lack of regulation can create instability.”
Keating said that in the current regulatory environment, nonbank lenders and payment firms — including those whose boards Summers sits on — enjoy a “significant advantage” due to the costs of bank compliance. “We should not create a two-tiered system that encourages consumers to seek financial services with fewer protections,” he wrote. “Consumers must receive the same level of protection whether they choose to do business with a bank or with marketplace lenders and other challengers.”
