FDIC has deprioritized and defunded critical efforts, opting instead to pursue policies and activities that stymie innovation, put undue burden on community banks, and harms consumers

AFC letter follows recent inquiry from leading Members of Congress expressing serious concerns with FDIC regulatory agenda in the financial services sector

AFC: FDIC is tilting the playing field against innovation‍

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Washington, D.C. (April 22, 2024) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies, including the largest innovative Banking-as-a-Service (BaaS) banks, has sent a follow up letter to the Federal Deposit Insurance Corporation (FDIC) expressing serious concerns with its lack of communication and recent actions towards innovation in financial services. The de-prioritization of innovation efforts within the agency, coupled with its unbalanced enforcement activity, has disproportionately targeted banks who partner with fintech companies and has resulted in a significantly increased likelihood of receiving a formal enforcement action from the agency based solely upon the business model.

“The FDIC is supposed to be communicative and evenhanded in its examination and enforcement of financial institutions, but its recent, clear pattern of targeting banks who partner with fintech companies is obvious to anyone paying attention,” said Phil Goldfeder, Chief Executive Officer of AFC. “The FDIC's attempt to tilt the playing field against innovation raises serious legal questions about the behavior of a federal agency and, if left unchecked, will result in significant harm to community banks, not to mention the consumers and small businesses they serve.”

The letter sent on Friday, April 19^th details concerns related to the agency’s application of its risk-based framework. Agency engagement with industry is crucial to ensuring pragmatic regulatory frameworks and effective oversight of the modern banking system. With the rapidly evolving financial ecosystem, many federal and state agencies have proactively recognized the importance of engagement to properly understand the innovative product and service offerings in financial services. However, The FDIC has not engaged in the same manner as its fellow federal and state regulators.

“It appears that the FDIC has developed an approach towards its examinations of and enforcement actions for innovative banks that is improperly targeting certain institutions and severely stifling innovation, in turn limiting consumer choice in financial services,” wrote Goldfeder in his letter to Chairman Martin Gruenberg at the FDIC. “When considered in the broader context of FDIC’s posture towards innovation, including the dismantling of the agency’s FDITech Office, the FDIC’s enforcement actions, signal an overarching regulatory agenda that is devised to inhibit bank-fintech partnerships and stymie the innovation they provide.”

AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. Our members are also improving access to financial services and increasing overall competition in the financial services industry by lowering the cost of financial transactions, providing high-quality, affordable financial product options.

“We respectfully reiterate our commitment to working with your agency to find a prudent and collaborative path forward to ensure that the innovative banks receive the appropriate amount of oversight that does not impede responsible progress,” continued Goldfeder in his letter.

Read the full AFC Letter here.

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