Fintechs, Credit Unions Need Level Playing Field: CU Trades

As Congress struggles over how best to regulate fintech companies, credit unions on Friday renewed their call for a regulatory regime that is as strict as the one they must follow.

“Although CUNA supports the innovations developed and brought into the marketplace by fintech, we remain concerned the regulatory environment might create an environment in which consumers do not receive the same protections from unregulated businesses that offer services traditionally offered by credit unions and banks,” CUNA President/CEO Jim Nussle said in a letter to leaders of the House Financial Institutions and Insurance Subcommittee.

The panel held a hearing on fintech regulation on Friday.

“The pace of technological development in financial services has increased exponentially and dramatically, offering both benefits and potential challenges to the U.S. economy and consumers,” Subcommittee Chairman Blaine Luetkemeyer (R-MO), said.

In July, the Treasury Department issued a report calling on the Office of the Comptroller of the Currency to begin issuing special charters to fintech companies. Subsequently, the comptroller announced it would begin issuing those charters.

The Treasury Department also called on the CFPB to repeal its controversial payday lending rule.

In his letter, Nussle said that credit unions are partnering with fintech companies to ensure they can offer the most efficient and modern financial products.

NAFCU Vice President of Legislative Affairs Brad Thaler wrote a similar letter, saying that credit unions do not consider fintech companies adversaries, but added that the trade group is concerned that the companies may capitalize on supervisory gaps to obtain a competitive edge.

“As new companies emerge and compete in this area, it is important that they compete on a level playing field of regulation—from data security to consumer protection,” he wrote.

However, Dion Harrison, director of bank products at Elevate, a fintech company that uses technology to offer loans to non-prime consumers, said that any regulatory scheme must encourage innovation.

“Our industry needs a regulatory environment that supports innovation and collaboration, while clarifying the applicable and relevant guidance,” he said, in testimony prepared for the hearing.

The emergence of new financial products should not lead to a loosening of consumer protections, Scott Astrada, director of federal Advocacy at the Center for Responsible Lending, told the subcommittee.

He said, for instance, a special purpose non-bank charter could enable preemption of state oversight. He added that fintech companies should not be permitted to ignore consumer protection laws as they test their products.