State regulators propose draft language for multistate licensing

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WASHINGTON — The Conference of State Bank Supervisors has proposed model payments legislation that states could adopt to improve the state-by-state licensing process.

Fintechs have claimed that the multistate licensing process is overly burdensome. With the Office of the Comptroller of the Currency's specialized fintech charter posing a competitive threat, state regulators explored ways to make it easier for companies to continue operating at the state level.

As of June, nearly half of the state regulators across the nation have agreed to a more uniform standard for processing licenses for money transmitters and money-services businesses.

CSBS’s goal is to have all states on board by next year as part of a larger effort to streamline nonbank supervision, called Vision 2020.

The group released a draft document Thursday of legislation that states could adopt in their legislatures, and asked for feedback on the model language.

“This model law is a key component of the states’ work under Vision 2020 to create a modern nonbank licensing and supervision framework,” John Ryan, president and CEO of the bank supervisor group, said in a press release. “A 50-state law for money transmission offers nationwide consistency for companies, access to innovative financial products for citizens and more effective supervision by state regulators.”

As they try to advance a multistate licensing platform, states are also challenging the OCC's efforts to give fintech firms a federal options. A judge recently tossed out a CSBS lawsuit against the regulatory agency, saying the case was not ripe since no fintech firm has formally applied with the OCC. A separate suit challenging the OCC charter, brought by the New York State Department of Financial Services, is still pending.

The states' model law language was developed with a focus on three specific policies: that regulation should protect consumers from harm, should give states the ability to prevent bad actors from entering the financial system and should preserve public confidence in the financial services sector.

The bank supervisor conference is asking for specific comment on how the proposed model language can better inform state regulators looking to streamline the regulation of money services businesses, and how the licensing process itself can be simplified without adding risk.

The group also asked for feedback on two different approaches to measuring a firm’s financial condition in relation to the company’s balance sheet.

Commenters are asked to provide their response to the proposal by Nov. 1.

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Fintech Fintech regulations Licenses and charters State regulators CSBS OCC
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