The OCC has noted in the past that fintech charter holders will be held to the same strict standards that other federally chartered institutions must meet, which could include the Community Reinvestment Act (CRA) of 1977 — a law intended to reduce discriminatory lending practices against low income borrowers in poor areas.
Although a federal charter could exempt lenders from a confusing tangle of state laws, there is the question of applying the CRA law to non-bank entities.
With the law originally designed to make traditional lenders extend credit to people in their operational areas, how will regulators apply it to online platforms without brick and mortar offices? Additionally, what methods will regulators use to determine if a platform’s lending algorithm has discriminated against borrowers?
Beyond that, the biggest grey area lies in the consequences for platforms regulators perceive to have flouted the CRA's requirements. Would they be fined? Or worse, lose their charters?
Venture capitalists and other investors — the lifeblood of fintech — will walk if that is the case.
The idea of making fintech companies serve underbanked communities is great, but for now, it seems that having a fintech charter comes with the threat of antiquated rules and draconian consequences for falling foul of them.
The OCC has a job to do if it wants to control a 21st century industry in a 21st century way.