The head of the New York Department of Financial Services did not mince words Wednesday in criticizing a proposed federal fintech charter.

"We oppose the imposition of an entirely new regulatory scheme on an already fully functional and deeply rooted state regulatory landscape that is working," said Superintendent Maria T. Vullo, speaking at an Exchequer Club luncheon.

State regulators have already been quick to criticize the plan by the Office of the Comptroller of the Currency to consider limited-purpose charters for fintech companies.

In her remarks, which came one day after her department published a comment letter expressing its strong opposition to the charter plan, Vullo ran through a series of concerns she had with the OCC's initiative.

She argued that the agency had not taken into account states' work to regulate fintech companies, and that a national charter would put local laws at risk because of preemption.

"What happened to federalism and a state's right to police the activities within its own borders?" said Vullo. "There's not even lip service given to state rights in the proposal."

Vullo added that the OCC had not made clear how companies with a charter would be affected by separate but related regimes. For example, she said, it is uncertain what the consequences would be of a fintech firm gaining membership into the Federal Reserve System.

"The OCC will create a class of institutions for which the scope of applicable law is unclear," she said.

Vullo said states are better positioned to protect their consumers, acting as "first responders" for the industries in their jurisdiction.

She also expressed concern that the OCC plan could create a system of "regulatory arbitrage" that could disadvantage smaller companies that do not have the means to apply for a federal charter.

"I fully support efforts to encourage responsible innovation in the financial services industry," she said. But "the creation of a national charter will stifle rather than encourage innovation."

"It is not in the public interest to have a small number of technology-savvy firms dominating different types of financial services simply because they were able to get a national charter," Vullo added.

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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.