WASHINGTON — Acting Comptroller of the Currency Keith Noreika finally revealed his view of the agency's controversial fintech charter on Wednesday, making it clear he supported the effort while also sharply criticizing those against the endeavor.

“Quite simply, I think it is a good idea that deserves the thorough analysis and the careful consideration that we are giving it," he said in a speech to the Exchequer Club. “Companies that offer banking products and services should be allowed to apply for national bank charters so that they can pursue their businesses on a national scale if they choose, and if they meet the criteria and standards for doing so."

But Noreika also minced no words in disputing state regulators who have sued the OCC over the idea. They have said that the agency lacks the legal authority to create a specialized charter for nonbanks while also claiming that such charters could allow the spread of predatory lending and other consumer abuses. Norekia disagreed strongly with both points.

Keith Noreika, acting Comptroller of the Currency, listens during a Senate Banking Committee hearing in Washington.
"Where large-scale, short-term, consumer lending abuse occurs today, it does so through state-licensed and state-regulated companies, not national banks or federal savings associations," said acting Comptroller of the Currency Keith Noreika. Bloomberg News

“For many years, well before Dodd-Frank, the OCC fought to eliminate unfair and deceptive lending practices in the federal banking system,” Noreika said. “Where large-scale, short-term, consumer lending abuse occurs today, it does so through state-licensed and state-regulated companies, not national banks or federal savings associations.”

While saying he must be careful not to get into details about how the OCC will respond in court to legal arguments by the Conference of State Bank Supervisors and the New York State Department of Financial Services, Noreika affirmed that his agency has the power to act.

"Suffice it to say, the agency is developing its litigation response and plans to defend this authority vigorously," Noreika said.

Noreika also suggested that fintech companies would be better supervised if they obtained a national bank charter.

“Hundreds of fintechs presently compete against banks without the rigorous oversight and requirements facing national banks,” he said. “The supervision that accompanies becoming a national bank would help level the playing field in meaningful ways.”

His comments immediately drew the ire of the CSBS and other state regulators. They also put Noreika at odds with yet another set of regulators, following a high-profile battle with Consumer Financial Protection Bureau Director Richard Cordray over that agency's arbitration rule.

"Creative interpretations of the regs that go beyond the original intent is always going to be an issue for us," said John Ryan, the president and CEO of CSBS. "Now it’s going to be a question for the courts."

Maria Vullo, the head of the New York Department of Financial Services, said in a press release that the agency "will continue to fight the OCC’s efforts."

"As we clearly assert in our lawsuit, the OCC is simply not equipped nor legally authorized to provide the strict oversight and enforcement of anti-money laundering, consumer identification and transaction monitoring statutes and regulations that nonbank financial services companies require," she said.

Noreika said that the fintech charter would not allow the companies to skirt a number of state laws addressing issues ranging from fair lending and debt collection to taxation and crime. And the OCC requires banks to comply with laws on unfair or deceptive acts or practices, he said.

“Some opposition to granting national bank charters on consumer protection grounds ignores important changes in consumer protection and preemption over the last decade,” he said.

Despite these forceful comments, Noreika did not indicate whether he would move forward with the fintech charter in its current form, suggesting he is seeking alternatives. He offered prospective fintech applicants a smorgasbord of other options.

“The OCC has not determined whether it will actually accept or act upon applications from nondepository fintech companies for special purpose national bank charters that rely on” the agency’s disputed authority to charter nondepository institutions, Noreika said.

But fintechs have other options for operating nationally, he said. They could apply as full-service banks or other types of special-purpose national banks like trust banks, bankers’ banks and credit card banks.

“There is no dispute the OCC has the authority to charter these entities,” said Noreika, who has also publicly advocated for his agency to make bank chartering determinations on its own, without approval from the Federal Deposit Insurance Corp.

“Many fintech business models may fit well into these long-established categories of special purpose national bank charters that do not rely on the contested” question of the OCC’s authority to charter nondepository institutions.

When it comes to fintech companies, the OCC is open for business, Noreika said.

“Companies interested in exploring chartering options should review the Comptroller’s Licensing Manual ‘Charters’ booklet and contact the OCC’s Office of Innovation for an initial discussion,” he said.

Noreika's view is unlikely to be the final word on the matter for the OCC. Noreika took office two months ago, and his permanent successor, Joseph Otting, is expected to have his nomination hearing in the Senate Banking Committee soon, putting him on track to be confirmed by early fall. It's unclear what Otting's view of the fintech charter will be.

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