U.S. Treasury Department to Weigh In On Fintech Innovation

Written by Eamonn K. Moran

Press reports indicate that the U.S. Treasury Department anticipates releasing a report during the next few weeks that will provide some recommendations on financial services regulation. The report will be the fourth and final in a series from the Treasury Department on regulatory reforms, as mandated by President Donald Trump (the previous reports focused on asset management, banking, insurance and capital markets).

Craig Phillips, who serves as counselor to Treasury Secretary Steven Mnuchin, previewed the report during the Securities Industry and Financial Markets Association (SIFMA) conference in New York last week. The financial services landscape “has over 3,300 new fintech companies” and “over 20% of all personal loans” originate in the fintech marketplace, Phillips reportedly commented. Phillips reportedly stated that “one of the challenges will be to navigate a regulatory system that was designed in and for a different era.”

“What’s real critical is that regulations and regulators can serve to either inhibit or accelerate innovation,” Phillips reportedly said. “It’s critical that the latter is the case, that regulators help accelerate innovation.”

In his remarks, Phillips reportedly indicated that the report will recommend changes to existing regulations and, in some cases, provide rulemaking guidance. The report will also evaluate how regulators can accelerate innovation, reduce regulatory overlap, and tailor rules based on the size and complexity of various business models, including startups and established financial services institutions, Phillips reportedly added. Topics to be covered in the report include consumer and business lending, credit services, mortgage lending and servicing, student loans and student loan servicing, auto lending, small dollar lending and debt collection. The report also will review advanced credit modeling and enhanced credit scoring techniques, credit bureaus, payments, wealth management, digital financial planning, licensing and chartering issues, and improving communication between regulators and the firms they oversee. Additionally, Phillips reportedly said the report will address potentially changing rules for banks’ relationships with vendors in an effort to boost partnerships with fintech companies.

Phillips hinted that the Treasury Department may also include mention of regulatory sandboxes that help firms create new products and test them. “We need a new approach by regulators that permits experimentation for services and processes,” reportedly stated Phillips.

Phillips reportedly did not fully endorse the special purpose national bank (SPNB) charter being considered by the Office of the Comptroller of the Currency for fintech companies, but he reportedly did note that a federal charter (including the preemption powers it would provide) “has its pluses.”

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