ACT: McHenry bill would ease rules for fintech innovations
By: Mark Barrett
A bill introduced recently by Rep. Patrick McHenry, R-Lincoln, is intended to let financial technology companies get quick regulatory approval to test launch new products and businesses.
Under the measure, a dozen federal agencies that regulate banks, credit unions, lenders, stock brokerages and other financial services would set up innovation offices that would be charged with working on new products from companies in the field usually called “fintech.” Fintech refers to companies that use new technology to offer products that have usually been the province of banks or other financial companies, like online lending or a mobile phone app that allows people to put money into a savings account.
Companies could apply for an “enforceable compliance agreement” that, if the regulating agency goes along, would allow them to provide a service without regard to regulations aimed at more traditional financial companies.
McHenry said in a statement that the bill “represents a mindset shift in the way we address financial regulation. Rather than the command-and-control structure of the past, my bill establishes an evolved regulatory framework that encourages financial innovation, all while maintaining our regulators’ commitment to the safety of consumers and our financial markets.”
“New financial technologies already make it easier to pay friends, save for college, or access credit needed to start and grow a business,” McHenry said. “Continued innovation will only further that progress, making it easier and cheaper for all Americans to access our financial system.”
The bill would create a structure similar to the “sandbox” for fintech companies the United Kingdom established recently. McHenry and UK regulators say they are trying to create a structure to allow companies to create, say, new ways people can use technology to take out a car loan without requiring the company involved to go through a lengthy process of regulatory approval for just a pilot project.
States would still be able to take regulatory actions against a company if they find their actions have harmed consumers.
The bill would be a significant change in direction in a field that is plenty complicated. An industry publication has quoted McHenry as saying it’s unlikely the bill will move much before this session of Congress ends at the end of the year, but he hopes it will start a conversation that could result in action in the next Congress, which gets underway in January.
McHenry has gained some recognition for his involvement in the sometimes arcane field of fintech, as well as some criticism from Democrats who are skeptical of easing regulations too much. Politico, the website on all things political, published an interview with McHenry on the topic Wednesday, calling him “Fintech’s voice on the Hill.” A link is below.
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