OCC Issues Draft Licensing Manual for Fintech Charter Applicants

The Office of the Comptroller of the Currency today released its long-awaited draft licensing manual for fintech companies seeking the agency’s new limited-purpose national bank charters. The manual spells out in greater detail than at any point previously how applicants can seek a charter and how the OCC will review applications and examine newly chartered fintech firms. Consistent with previous OCC statements and papers, the manual makes clear that the special-purpose charters will be subject to all applicable banking laws and regulations. It also clarifies that the special-purpose charters will not authorize deposit-taking.

“This manual reflects the approach we’ve seen from the OCC all along, and it’s clear that this is not a ‘bank-lite’ charter,” said ABA VP Rob Morgan. “The OCC has also clarified several points in response to American Bankers Association and other industry feedback.” Comments on the manual are due by April 14.

The manual walks through the initial steps of applying, the chartering standards the OCC will apply, the business plan the applicant is expected to provide and the OCC’s final decision-making process. For example, the manual notes that some members of the organizing group, management and board would usually be expected to have “experience in regulated financial services” in addition to experience with the kind of novel products or services the company may propose to offer.

It also provides greater texture on the “financial inclusion plans” that each applicant whose business plan includes consumer or small business lending will be required to provide as part of their applications. The inclusion plans will be an “enforceable condition” for any charter granted, the agency says in the manual. They will also be published publicly for comment. Each plan must address the applicant’s proposed “goals, approach, activities and milestones” for meeting the needs of underserved individuals in its “relevant market or community.”

In response to concerns expressed by ABA, the draft manual makes clear that the agency “will not approve proposals that would result in an inappropriate commingling of banking and commerce.” It also emphasized that the OCC will collaborate with other regulators to ensure no such mixing occurs.

The manual also addresses concerns expressed about erosion of the dual system of financial supervision in the United States and about one-size-fits-all regulation of fintech. “This [manual]is not intended to discourage these other ways of conducting business but rather to clarify the OCC’s expectations for a particular segment of financial service providers — that is, fintech companies seeking [a special-purpose national bank]charter,” the agency says, acknowledging that fintech firms may continue to seek state charters, apply for full-service national bank charters or pursue partnerships with existing depository institutions.