WASHINGTON — In a letter to 13 fintech companies, California’s financial regulator on Tuesday acknowledged the limitations of the state-by-state licensing system and pledged to hear their suggestions on how to improve it.
Jan Owen, the state’s commissioner of business oversight, invited the companies to meet with her in late March for a “frank, constructive dialogue.”
“The industry has legitimate criticisms about the lack of consistency and certainty in the current state regulatory regime,” Owen said. “I am interested in finding ways to improve the interstate regulatory structure so fintech companies can operate across jurisdictional lines with less cost, regulatory burden and compliance risk.”
However, Owen added that in her bid to create a more welcoming regulatory framework for finech companies, she did not want to roll back consumer protection standards.
In her letter, she asked fintech companies to describe the obstacles they faced in the state regulatory system and to offer recommendations on how to address them.
But she also asked, “How does the preservation of states’ interest in protecting their consumers and businesses fit into the solution?”
The 13 companies had previously participated in an inquiry on online lenders launched by the California Department of Business Oversight in late 2015. They are Affirm, Avant, Bond Street, CAN Capital, Fundbox, Funding Circle, Kabbage, LendingClub, OnDeck, PayPal, Prosper, SoFi and Square.
Ever since the Office of the Comptroller of the Currency announced in December that it would start granting limited-purpose national bank charters to fintech firms, California has sought to take a lead on efforts to reform the state-by-state licensing scheme.
“We're not enamored with the OCC plan, but we do believe that it’s incumbent on state regulators to not just complain about the OCC fintech charter, but to devise an alternative,” said Tom Dresslar, a spokesman for the California agency. “State supervisors should engage in a serious undertaking to identify legitimate concerns that the fintech industry has about the current system.”
Fintech companies have long complained that having to obtain licenses in each state they want to operate in has slowed down their expansion and kept them from offering unified products and services to customers nationwide.
At this point, the California agency is open to discussing any and all solutions, Dresslar siad. “We want everything brought to the table,” he said. “We don't want to foreclose any potential ideas or solutions.”