Federal: AFC Letter to Jonathan Gould, Acting Comptroller of the Currency

Mr. Johnathan V. Gould
Partner
Jones Day
51 Louisiana Ave NW, Washington, DC 20001

Dear Mr. Gould

On behalf of the American Fintech Council (AFC),  I want to congratulate you on your nomination for Comptroller of the Currency at the Office of the Comptroller of the Currency (OCC). AFC fully supports your nomination for Comptroller of the Currency and encourages the Senate to a prompt confirmation process.

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by fostering safe and responsible innovation in financial technology (Fintech) and encouraging sound public policy. AFC members, made up of fintech companies and innovative banks, are at the forefront of fostering competition in financial services and pioneering ways to better serve underserved consumer segments and geographies. AFC and its members strongly support the development and implementation of regulatory frameworks that encourage the responsible development of innovative financial products and services.

Throughout your career, you have been shown a deep commitment to ensuring a robust and resilient banking system. Specifically, your leadership on the “Madden Rule” and endeavors to encourage the chartering of innovative companies exemplify your commitment to building a banking system that encourages responsible innovation that will be crucial to ensuring the U.S. banking system remains the envy of the world.

Overall, the OCC has consistently maintained a proactive approach towards encouraging responsible innovation. From the establishment of the Office of Innovation in 2016, to its expansion of that effort via the establishment of the Office of Financial Technology, the OCC has recognized the importance of fostering responsible innovation in the U.S. banking system. AFC fully supports the continued development of OCC’s efforts to encourage responsible innovation. As you move forward in your confirmation process, AFC respectfully requests your consideration of the key policy priorities listed below. Once confirmed, AFC encourages you to pursue the swift implementation of several agency endeavors that will ensure the continued success of innovative banks and their fintech partners:

• Reengage the True Lender Issue: AFC has long advocated for clarity and a unified regulatory approach to the determination of who constitutes the “True Lender” within a bank-fintech partnership. AFC has consistently ascribed to the common understanding that the “True Lender” of a loan in a bank-fintech partnership is bank, as they are the institution listed on the loan’s origination documents. Historically, the OCC has concurred with this view and promulgated a formal legislative rulemaking to codify this view.  Unfortunately, due to timing and partisan politics, the final rule was invalidated by the 117th Congress in 2021.  

In the intervening years, innovative banks and their fintech partners have faced a patchwork of state laws that pursued novel interpretations of which entity functions as the “lender” within a bank-fintech partnership. These state laws have unfortunately disregarded long-standing practice that recognized the institution listed on the loan origination documents as the “lender”.

To address the patchwork regulatory framework existing in the “True Lender” issue, AFC respectfully requests that once confirmed as Comptroller of the Currency, OCC, in coordination with the other prudential regulators, reengage on the “True Lender” issue by pursuing a joint legislative rulemaking to provide certainty to the fintech lending market. AFC believes that pursuit of a joint rulemaking will allow functionally expand the scope of the rule and avoid running afoul of the limitations on reproposing invalidated rules enumerated in the Congressional Review Act.

• Redouble Efforts of the Office of Financial Technology: AFC has consistently supported the efforts of federal banking regulators to build agency infrastructure that encourages the development of responsible innovation and assists agency staff in understanding the nuances associated with bank-fintech partnerships. To that end, the original development of the OCC’s Office of Innovation and subsequent expansion into the Office of Financial Technology has proved effective in creating an agency culture that seeks to understand innovative products and services offered through innovative banks and fintech companies properly, as well as develop a prudent regulatory framework that allows these entities to effectively serve consumers—particularly those who have been historically underserved. In an effort to build on the positive contributions made by the Office of Financial Technology, AFC respectfully requests that you redouble OCC’s efforts in this area by continuing to prioritize and allocate the resources to the Office of Financial Technology necessary to help this office achieve its mission. Given OCC’s leadership on these efforts, we also encourage you to collaborate with your fellow prudential regulators to ensure a standardized approach by federal regulators that encourages responsible innovation.

Further, we respectfully request that you encourage agency staff to pursue innovative approaches to conducting their supervisory and examination activities by enabling regulated banks under OCC’s jurisdiction to use regtech tools and by leveraging these tools internally where appropriate. In combination, leveraging regtech tools throughout the supervision and examination process can lead to more efficient and effective examinations; thus, improving the resilience of the financial services industry.

• Develop innovation-focused supervisory and examination materials: AFC strongly believes in the importance of maintaining clear and consistent “rules of the road” for innovative banks and their fintech partners, as well as an examination framework that ensures consumers remain protected while also encouraging innovation. The pace and impact of innovation in financial services requires examiners to build their understanding of the nuanced business models and activities of innovative banks and fintech companies. As the activities of innovative banks and fintech companies continue to grow within the market, examiners across the federal regulatory landscape will need to become more knowledgeable of the nuances of the innovative activities pursued by the financial institutions they regulate. To support this critical knowledge-building AFC respectfully requests that you develop innovation focused supervisory and examination materials in coordination with leading industry voices. By pursuing such proactive efforts, OCC will remain at the forefront of understanding the relevant developments in bank-fintech partnerships and be more prepared to properly assess the risk profiles of the banks pursuing these activities. In turn, this will help ensure the continued development of responsible innovation throughout the financial services industry and encourage OCC’s fellow prudential regulators to pursue similar knowledge-building activities.

Again, I would like to congratulate you on your nomination for Comptroller of the Currency at OCC. As you move forward in your confirmation process, AFC provides its full support. Upon your confirmation, we look forward to continuing our collaboration to promote and develop policies that encourage responsible innovation and pragmatic regulation of the modern financial services industry.

Sincerely,

Hon. Phil Goldfeder, CEO
American Fintech Council

[1] American Fintech Council’s (AFC) membership spans EWAproviders, lenders, banks, payments providers, loan servicers, credit bureaus,and personal financial management companies.

[2] Office of the Comptroller of theCurrency, “National Banks and Federal Savings Associations as Lenders”, Fed.Reg. 85, no. 211 (Oct. 30, 2020): 68742.

[3] Office of the Comptroller of the Currency,“Acting Comptroller Statement on the Vote to Overturn OCC True Lender Rule”,(Jun. 24, 2021).

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