Comment letter questions timing, highlights deficiencies in Proposed Rule and recommends collaborative, industry-led solutions

‍As a standards-based organization, AFC is committed to working with incoming regulatory leaders to ensure sound regulatory practice and consumer protection

Washington, D.C. (January 17, 2025) – The American Fintech Council (AFC), the premier trade association representing responsible fintech companies and innovative banks, today submitted a comment letter to the Federal Deposit Insurance Corporation (FDIC) opposing its Proposed Rule on Recordkeeping for Custodial Accounts. AFC urged the FDIC to withdraw the proposal, calling it ill-conceived and cautioning that, if enacted, it could stifle responsible innovation and harm consumers without addressing broader market concerns.

“While AFC agrees with the principles of the Proposed Rule, reacting to an isolated event, rather than addressing systemic issues, risks creating an overly prescriptive regulatory environment that undermines confidence in financial services and discourages responsible innovation,” said Phil Goldfeder, Chief Executive Officer of AFC. “The Proposed Rule fails to reflect the hallmarks of sound policymaking. We urge the FDIC to instead work with industry stakeholders to strengthen existing practices and ensure effective, consumer-focused outcomes.”

The letter outlines several key concerns with the Proposed Rule, including its reliance on insufficient data, its reactive basis in response to a single industry event, and its failure to align with broader regulatory and market realities. AFC emphasized that the Proposed Rule could impose unnecessary burdens on responsible financial institutions, making custodial accounts prohibitively expensive to offer, and ultimately harming historically underserved consumers who rely on these services.

“The Proposed Rule is poorly timed and does not consider the existing industry efforts to remedy the issues covered, nor the state and federal requirements that already govern many custodial accounts,” said Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC. “The FDIC has acknowledged significant limitations in its own data and analysis, which undermines the rationale for the rule and calls into question the accuracy of its projected costs. Pragmatic policymaking should address market-wide issues with input from stakeholders—not impose a blanket response to a single failure.”

AFC’s letter recommends that the FDIC withdraw the Proposed Rule and engage with industry leaders to promote best practices and leverage existing regulatory frameworks. By collaborating with stakeholders, the FDIC can foster responsible innovation while ensuring transparency, accuracy, and security in custodial account recordkeeping.

A standards-based organization, AFC is the premier trade association representing the largest financial technology (fintech) companies and innovative banks offering embedded finance solutions. AFC’s mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.