On September 14, 2017, the Consumer Financial Protection Bureau (the “CFPB”) issued its first no-action letter (the “No-Action Letter”) concerning the operations of Upstart Network, Inc. (“Upstart”), a FinTech lender that utilizes alternative data in assessing the creditworthiness of prospective customers. While Upstart’s No-Action Letter has narrow applicability, it may serve as a tool for other FinTech lenders in implementing innovative products and services and establishing relationships with banks.

Background

The financial services industry is changing. With innovative technology and business models, FinTech companies have brought an interesting and complex issue center stage. Namely, how will the CFPB seek to regulate these FinTech companies and their innovative operations within the context of rigid consumer financial protection laws. Although the answer is not yet clear, it appears that the CFPB is trying to better understand how FinTech companies operate.

In October 2016, the CFPB issued its final No-Action Letter Policy (the “NAL Policy”). The NAL Policy permits institutions to submit a request to the CFPB to issue a statement that the CFPB has no present intention to recommend initiation of an enforcement or supervisory action against the applicant with respect to a particular product or service’s compliance with specifically identified regulatory requirements. For example, an applicant may seek to obtain assurance from the CFPB that the applicant’s form disclosure otherwise complies with the Truth in Lending Act and Regulation Z.
Continue Reading CFPB’s First No-Action Letter: FinTech Lenders and Banks Take Note

On March 15, 2017, the Office of the Comptroller of the Currency (the “OCC”) published for comment a draft supplement to the OCC’s existing Comptroller’s Licensing Manual providing detail on how the OCC will evaluate national bank charter applications from financial technology (‘FinTech”) companies that engage in the business of banking, other than accepting deposits. In so doing, the OCC has moved one step closer to making its FinTech bank charter a reality. Below we provide a summary of the proposed OCC guidelines for accepting and approving a FinTech charter (the “FinTech Guidelines”).

Who may apply for a special purpose national bank charter?

The OCC has authority to grant charters for national banks and federal savings associations. That authority extends to the granting of charters for special purpose national banks (“SPNB”). SPNBs may limit their activities to fiduciary activities or to any other activities within the business of banking. However, with respect to the SPNB charter for FinTech companies, the OCC states that it will only accept applications from FinTech companies engaged in either (i) paying checks or (ii) lending money.
Continue Reading The OCC Speaks: How FinTech Applications Will Be Reviewed