The New York State Department of Financial Services (DFS) has released a damning letter regarding new proposals from the Office of the Comptroller of the Currency (OCC) to create a new national bank charter for FinTech firms.

In the letter, the DFS argued that the OCC has never previously regulated non-bank financial institutions and the National Bank Act does not provide the OCC with the authority to create this new proposed charter.

It states that the creation of a national charter is likely to stifle rather than encourage innovation, as it would be an avenue for larger firms to control the development of technology solutions in the financial services industry.

Furthermore, the letter cites the recent financial crisis as a demonstration of how lax regulation on a federal level is “devasting for our financial systems and consumers”, stating that the proposals could permit companies to engage in regulatory arbitrage and avoid important state consumer protection laws.

Maria Vullo, superintendent of the DFS, said: “The OCC should not use technological advances as an excuse to attempt to usurp state laws that already regulate FinTech activities where they intersect with banking and lending, whether depository or non-depository.

“New York is the leader of innovation and will continue to promote small businesses and leaders in this field. However, a one-size-fits-all federal charter will not work to create a level-playing field among all financial services companies, or to alleviate risks. On the contrary, the proposal increases risk, creates an opportunity for regulatory arbitrage and attacks states sovereignty. New York will continue to protect our markets and consumers.”

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