One lawmaker has a solution for which U.S. regulator should take the lead on fintech firms -- all of them.
Representative Patrick McHenry plans to introduce legislation this week that would call for each financial regulator to create an in-house office to deal with start-ups that provide financial services as well as new technologies used by banks. The measure would also require a separate committee to monitor those offices and promote collaboration among the agencies.
Policy makers are under pressure to adopt rules for fintech that ensure safety without stifling innovation. There’s been even more urgency amid a scandal that engulfed online lending pioneer LendingClub Corp. earlier this year. A lot of money is at stake -- $13.8 billion of investment poured into fintech companies last year, according to data from CB Insights and KPMG International.
McHenry’s legislation would create a designated place for fintech companies to turn to for ensuring new products, ranging from consumer payment technology to systems for settling trades, are compliant. Banks, technology giants as well as start-ups have provided input and support the measure, according to McHenry, a North Carolina Republican and vice chairman of the House Financial Services Committee.
“The goal here is this legislation will outlast the term ‘fintech,’” McHenry said in an interview. “It becomes a new approach for every regulator going forward.”
Technology companies along with banks would be able to request changes to existing rules by appealing to the innovation office at any agency of their choosing. That would help regulators keep up with the rapid pace of technology in the finance industry, according to McHenry.
A Treasury Department report earlier this year called for stricter scrutiny of the industry. Another regulator, the Office of the Comptroller of the Currency, has said it’s evaluating creating a charter for fintech firms, and its chief Thomas Curry said at a conference earlier this year that regulators had to watch for risks in fintech.
The regulators that would be required to participate in McHenry’s measure include the OCC, the Federal Reserve, the Consumer Financial Protection Bureau and the Securities and Exchange Commission. The inter-agency committee will have a chair as well as representatives from all the regulators and meet regularly. Additional resources wouldn’t be required because the overseers already have the expertise and personnel, McHenry said.
Prior attempts at having many regulators work together, such as multi-agency groups tasked with writing Dodd-Frank Act rules or the Financial Stability Oversight Council, have proven to be difficult.