CUNA, NAFCU Warn Fintech Bank National Charter Would Violate Law
They say the company does not plan to be insured by any prudential regulator - a requirement for all national banks.
Federal law prohibits the Office of the Comptroller of the Currency from issuing a national bank charter to Figure Technologies, a fintech company that offers financial services through blockchain technologies, credit union and banking trade groups have warned the agency.
The law “is clear that every national bank must be a member of the Federal Reserve System and every member of the Federal Reserve System must be an insured bank,” the groups, including CUNA, NAFCU and the major banking trades, said in a sharply worded letter to Acting Comptroller Brian Brooks. “Congress made the decision in 1933, over strident opposition, to provide deposit insurance on a mandatory basis. Only Congress can reverse that decision.”
They said the company does not plan to be insured by any prudential regulator — a requirement for all national banks.
“As an uninsured national bank, Applicant would evade core prudential standards and limits that Congress has established to ensure the safety and soundness of banks, protect the financial stability of the United States, and prevent the mixing of banking and commerce,” they added.
Figure said it only wants to simplify the complexity of its business.
“Figure is pursuing the charter to reduce the complexity of our business – we’ll have over 200 state licenses next year without such a charter,” Mike Cagney, cofounder and CEO of Figure, a Reno, Nev., company, recently said. “By reducing complexity, we can leverage the technology efficiencies we have to deliver financial solutions to traditionally underserved and underrepresented consumers, driving real financial inclusion.”
The company, in announcing its plans, said that a national charter would allow the company to offer products nationwide, while focusing its compliance efforts on the requirements of a single regulator. The company said it partners with credit unions and banks in offering its current services.
The financial trade groups said that the OCC has not released the specific details of the company’s proposal and has allowed the company to keep the details private.
However, the company said there should be no cause for alarm.
“The only novel aspect of our application is our blockchain ledger and that we are not applying for FDIC insurance, as we believe we are better served taking institutional deposits while offering insured deposits through our partner banks and credit unions,” the company said in explaining the decision to seek the charter.