WASHINGTON — Acting Comptroller of the Currency Keith Noreika affirmed Thursday that the agency’s fintech charter, if implemented, could be granted to commercial firms like Walmart or Google.

Under the fintech charter, a financial institution “wouldn’t be a bank for purposes of the Bank Holding Company Act,” he said at a fintech conference organized by the Federal Reserve Bank of Philadelphia.

“It wouldn’t be subject to those affiliation restrictions and also it wouldn’t necessarily have to wait in the long queue to get [deposit] insurance" from the Federal Deposit Insurance Corp., Noreika added.

Keith Noreika, acting Comptroller of the Currency
Acting Comptroller Keith Noreika also criticized the CFPB's rule banning mandatory arbitration clauses, providing statistics that it would increase costs for banks and consumers. Bloomberg News

That appears to be a pivot from the fintech charter originally envisioned by Thomas Curry, the former OCC head who spearheaded the project.

In a March speech defending the initiative from attacks by progressives, Curry asserted that he opposed the notion of allowing a company that is not primarily engaged in financial activities to own a bank, even through the fintech charter.

“Proposals that would mix banking and commerce are inconsistent with the OCC’s chartering standards and would not be approved,” Curry said.

The OCC’s white paper outlining its plans for the fintech charter in December also remained clear on the matter: for a fintech company interested in that charter, “the BHCA could apply,” the agency said.

If a financial institution were to be covered by the Bank Holding Company Act, its parent company would automatically be subject to supervision by the Federal Reserve Board, as well as restrictions on the type of nonfinancial activities it can pursue.

But Noreika said the principle of separating banking and commerce had become “religious” and should be re-evaluated.

“There are incredibly good arguments on both sides,” he said. “Fintech is the latest venue in which this needs to be approached.”

But fintech companies should not wait for these questions to be resolved by regulators, he suggested.

Such uncertainty “allows innovators like you to create within the interstices of this regulatory overlap,” Noreika said.

Opening the fintech charter to commercial firms is only likely to increase the controversy surrounding the idea, which is already subject to two legal challenges. Noreika has said it's not clear the OCC will even offer the charter.

The acting comptroller also criticized the Consumer Protection Financial Bureau’s rule to ban mandatory arbitration clauses, arguing that it would be costly to banks as well as consumers.

He disclosed the results of a study performed by the OCC, based on the CFPB’s data, but which he said came to a different conclusion than the consumer agency on the rule’s impact on consumers.

“There could be as high as a 3.5% annual percentage rate increase for these consumers who would be subject to the rule,” he said. “That’s like a 25% increase in credit cost for people who may live week to week.”

The OCC’s study, released publicly on Thursday, found that credit card costs would increase by an expected 3.43%.

“That gives real concerns not only with respect to the potential safety-and-soundness impact that that rule may have on banks,” Noreika said, “but there also is a real tangible economic effect that this may have on consumers, especially those who live week to week."

The study, Noreika added, came as a result of “a back-and forth with the director of the CFPB,” Richard Cordray, who, “graciously, after a few letters … agreed to share their data,” he said.

Noreika also criticized one of the main tasks of the Financial Stability Oversight Council: the designation of financial institutions as systemically important.

“Pulling one unfortunate company out from a competitive industry and marking them with an additional burden,” he said, is equivalent to “picking winners and losers.”

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Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.