SoFi’s bid for deposit insurance draws fire from top House Democrat
WASHINGTON – Rep. Maxine Waters, D-Calif., is calling for a public hearing on online lender SoFi’s application for an industrial loan company charter, which would allow the company to accept deposits and access deposit insurance.
“Granting SoFi’s application would set a precedent that a wide variety of other fintech companies may choose to follow even though concerns related to financial inclusion, consumer benefits, supervision, and regulation of such entities are still unresolved,” wrote the top Democrat on the House Financial Services Committee.
San Francisco-based SoFi is best known for refinancing student loans, though it also recently began offering mortgages and personal loans. It is part of a new wave of financial technology companies out to disrupt the traditional banking business by offering near-instant approvals on loan applications.
Bankers have expressed concern that the ILC charter creates an uneven playing field because ILCs are not subject to supervision at the holding company level. The California Reinvestment Coalition has also opposed SoFi’s ILC application on grounds that the lender's Community Reinvestment Act Plan is inadequate.
“The FDIC should carefully consider these concerns when reviewing SoFi’s application, and in doing so, hold a public hearing to allow for a fuller vetting of the advantages and disadvantages of extending an outdated regulatory framework for ILCs to fintech companies, and the potential implications for the broader financial system,” Waters wrote.
A spokeswoman for the FDIC said that the agency has received the letter and will respond.
Waters also questioned whether the Office of the Comptroller of the Currency's proposal for a special purpose national charter for fintech companies should move forward.
“Questions have been raised about whether the benefits to consumers for this new charter will be widely and fairly shared, and whether there is adequate legal authority, let alone a clearly defined and modern regulatory framework, for such a fintech charter,” wrote Waters.
She added that while “some experts have touted the possibility that fintech firms can help promote financial inclusion, others have underscored the challenges posed for our current regulatory regime to oversee these types of companies and have underscored the need for policymakers to carefully evaluate the consequences of allowing them access to deposit insurance and the Federal Reserve discount window.”