Analysis Featured

Quick reaction to the OCC’s Fintech Charter

Today the Office of the Comptroller of the Currency has announced “Exploring Special Purpose
National Bank Charters for Fintech Companies” . The details of the announcement can be found here.

Brian Korn, attorney at Manatt, Phelps & Phillips, LLP , has shared with us the following thoughts on this special purpose charter that are relevant for the recent fintech charter comment request related to marketplace lenders:

Brian Korn says:

  1. “Is the charter optional?  He assumes a company can continue to use third-party lenders like banks or obtain state licenses or do without a license if not required.”
  1. “Can they get access to Fed discount window?  Can they pick a state and use the usury limits of that state? “
  1. “Madden would not apply if the loan is held by a national bank.  True lender would not apply either since the fintech firm would itself be a “non-depository bank.””
  1. “It must be fully-preemptive- states are going to fight this harder than the Reg A tier 2 preemption because it effectively puts the Cal DBO, NYS DFS, and other agencies out of business, depending on cost and user friendliness.”
  1. “Short comment period- Jan 15.  I expect this gets extended, but don’t see soon-to-be Treas. Secretary Mnuchin fighting this too hard, unless Goldman is against it  because they went and obtained a NY State license.”
  1. “Time to obtain a charter, review requirements, and capital requirements are all TBD.  If they are too high, fintech will not bite.  Fintech will always opt for the regulatory path of least resistance, all other things including enforcement risk being equal.”
  1. “Curry notes that federal banking laws apply to banks generally- other than FDIC compliance which exempts from CRA.  It would be difficult for most fintech firms to comply with the Reg W affiliate requirements without significant restructuring. Platforms should be prepared to fully comply with federal banking laws, including strict affiliate transaction prohibitions”
  1. “Curry’s term expires in April 2017.  A new Comptroller will have to bring this to life.”

We look forward to more in-depth analysis in the coming days. In all cases, we look forward to this step in the right direction which adds another regulatory path for marketplace lenders.

George Popescu
George Popescu

 

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

1 Comment

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  • Great comment and questions, George.

    An OCC Charter will likely be limited to only the largest non-bank finance and payment companies. The requirements for a charter are extensive and expensive. Most alt fins will not have the resources in $ or people to go the charter route. But, the top five alt fins are likely to get charters.

    One big question is whether a charter becomes a cost of business and basic hurdle for alt fins to work with banks. TBD.

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