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AFC emphasizes the proposed rule’s potential harm to consumers, financial innovation, and the stability of responsible bank-fintech partnerships.

Washington, D.C. (November 25, 2024) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies and innovative banks, recently submitted a comment letter to the Federal Deposit Insurance Corporation (FDIC) urging the withdrawal of its proposed rulemaking on brokered deposits. The proposed rule raises significant concerns due to its departure from recently established regulations and its likelihood to harm consumers, stifle competition, and undermine financial innovation.

AFC’s concerns with the proposed rule include its flawed analysis of deposit stability, potential market and consumer harm, and its failure to address the actual causes of recent bank failures. AFC’s recommendations underscore the importance of fostering responsible innovation and ensuring a regulatory framework that supports financial inclusion and stability.

“The FDIC’s proposed rule threatens to undo years of progress in creating a more inclusive, innovative, and consumer-centered financial system,” said Phil Goldfeder, CEO of AFC. “This proposal would not only harm underserved communities, but also weaken the resilience of the financial services industry. AFC is committed to advocating for sound, evidence-based regulation that promotes responsible innovation and supports all consumers.”

The proposed rule mischaracterizes deposits obtained through bank-fintech partnerships. Contrary to the FDIC’s assertions, these deposits are exceptionally stable and well-documented. They serve as primary checking and savings accounts for consumers who use them for everyday banking needs, such as payroll deposits and debit card transactions, rather than rate-shopping. AFC emphasizes that deposits originating from bank-fintech partnerships function similarly to core deposits at traditional financial institutions, offering no increased risk to the resilience of the financial institution or the Deposit Insurance Fund.

AFC also raises concerns about the potential market and consumer harm the proposed rule poses. Redefining brokered deposits and eliminating exemptions would undermine competition and innovation in the financial services industry. This could disproportionately harm historically underserved communities that benefit from the affordable and accessible financial products offered through responsible bank-fintech partnerships. Without these partnerships, consumers may face increased fees and reduced access to financial services, driving them toward unregulated and potentially predatory alternatives.

“The technological competition that has been a hallmark of bank-fintech partnerships and helped to create a more inclusive financial services industry would be severely stymied if the Proposed Rule is finalized,” said Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC. “Without the competition and innovation provided in the current market, both community banks and the overarching financial services industry are less able to serve their customers effectively, particularly those who have been historically unbanked or underbanked. By pursuing the Proposed Rule as written, AFC believes that the FDIC will significantly harm innovation and competition in the financial services industry that has proven quite beneficial for improving banking services to all consumers.”

AFC strongly recommends the withdrawal of the proposed rule, which overlooks critical issues, such as the role of social media in deposit volatility, and instead imposes unwarranted burdens on innovative financial institutions and their fintech partners. AFC urges the FDIC to focus its regulatory efforts on addressing pressing risks to the banking system while supporting responsible innovation.

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.

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