Treasury Recommends Pro-Innovation Updates to Fintech Regulation

The Treasury Department today issued a long-awaited report recommending changes to laws and regulations affecting nonbank financial providers and the broader fintech environment. The fourth in a series of reports issued in response to President Trump’s executive order on core principles for financial regulation, this report includes several recommendations long advocated by the American Bankers Association as part of its efforts to enhance financial innovation.

“We are encouraged to see that the Treasury Department’s fintech report recognizes the innovative technologies banks have already deployed and will continue to develop, both on their own and in partnership with others,” said ABA President and CEO Rob Nichols. “We continue to review the recommendations in the report, but we appreciate that many of the ideas are consistent with the principles set forth in the white paper ABA sent to Treasury earlier this year.”

Reflecting the ongoing evolution of technology, Treasury specifically recommended:

  • “Removing legal and regulatory uncertainties” related to consumer data access in order to move away from the controversial practice of “screen scraping”
  • Modernizing the Telephone Consumer Protection Act
  • Setting consistent data security standards for banks and nonbanks
  • Codifying the “valid-when-made” doctrine
  • Encouraging small-dollar, short-term lending and rescinding the Consumer Financial Protection Bureau’s payday lending rule
  • Modernizing the IRS system to get tax transcripts through an application programming interface
  • Harmonizing state-level money transmitter requirements

Treasury also recommended that regulators at the state and federal levels enhance their cooperation by streamlining and coordinating examinations and clarifying guidance on bank partnerships with nonbank fintech companies. It also urged the OCC to continue pursuing its special-purpose national bank charter for fintech companies, and it recommended the creation of a “regulatory sandbox” that would allow companies to test innovative services while maintaining consumer protections.

“We welcome the flexibility Treasury recommends in allowing banks to partner with financial start-ups to deliver new products through trusted channels and the need for sensitive customer financial data to remain protected,” Nichols added. “ABA will carefully review Treasury’s payments recommendations to ensure they reflect the market-based approaches that serve customers so well today.”