New Bill Would Provide Compliance Safe Harbors for Innovation

Under a bill introduced by Rep. Patrick McHenry (R-N.C.) today, companies — banks and nonbank financial technology firms alike — will be able to test innovative fintech products under a streamlined process with greater certainty about compliance requirements. “New financial technologies already make it easier to pay friends, save for college, or access credit needed to start and grow a business,” McHenry said. “Continued innovation will only further that progress, making it easier and cheaper for all Americans to access our financial system.”

The Financial Services Innovation Act (H.R. 6118) would require several agencies, including all federal financial regulators and the Federal Trade Commission, to establish Financial Services Innovation Offices. Any company, bank or nonbank, wishing to offer financial innovations would be able to apply to the FSIO of their choosing, seeking a modification to or waiver of particular rules or statutes and seeking an alternative compliance agreement.

Through notice-and-comment rulemaking, the FSIOs would review each petition promptly, with a burden to prove the costs outweigh the benefits in the case of a denial. Once approved, the company would enter an enforceable compliance agreement outlining the alternative strategy and protecting the innovation from enforcement on other grounds or by other agencies. Each FSIO would be given authority to waive outdated or burdensome statutory or regulatory requirements so long as the agency’s reading of the rule or statute is rational.

American Bankers Association staff are carefully reviewing the legislation, which appears aligned with ABA’s broad principles for supporting fintech innovation: focusing on activities, not on charter type; being based on up-to-date laws; and offering a regulatory “greenhouse” to test innovations. ABA experts consulted with McHenry’s staff as the legislation was being drafted.