Treasury releases report on fintech and nonbank financial institutions

Aug. 1, 2018 -- Yesterday, the U.S. Department of the Treasury released a report with recommendations to improve the regulatory landscape for fintechs and nonbank financial institutions. The “Report on Nonbank Financials, Fintech, and Innovation” is Treasury’s fourth report in response to Executive Order 13772. Issued by President Trump in February 2017, the Executive Order requires Treasury to identify laws and regulations that are inconsistent with the Core Principles for financial regulation it set forth.

According to Treasury, the report’s recommendations are designed to: 

  • Embrace the efficient and responsible use of consumer financial data and competitive technologies.
  • Streamline the regulatory environment to foster innovation across business models.
  • Modernize activity-specific regulations.
  • Facilitate experimentation.

While credit unions are not specifically mentioned in the report outside of the general context of being in the financial services community, the report does reference state authority regarding small dollar lending, licensing and examination and data breach notification. 

Regarding small dollar, short term lenders, Treasury notes that the states already regulate these businesses and as such, BCFP should rescind its Small Dollar Rule. The report argues that rule only further restricts access to credit. 

The report calls on states to harmonize money transmitter requirements for licensing and supervisory examination. Treasury contends the harmonization will enable innovation and ensure a competitive marketplace for financial services.

To address the inconsistencies of state data breach notification laws, Treasury recommends that Congress enact a federal data security and breach notification law to protect consumer financial data and notify consumers of a breach in a timely manner. The law should be based on the following principles: 

  • Protect consumer financial data 
  • Ensure technology-neutral and scalable standards based on the size of an entity and type of activity in which the entity engages 
  • Recognize existing federal data security requirements for financial institutions 
  • Employ uniform national standards that preempt state laws 

In drafting the 222-page report, with more than 80 recommendations, Treasury said it consulted extensively with a wide range of stakeholders focused on consumer financial data aggregation, lending, payments, credit servicing, financial technology, and innovation.

LINKS:
Full Report

Fact Sheet