The proposed charter would undermine critical state protections and place small businesses at grave financial risk.
Today, Main Street Alliance expressed our concern over Comptroller Thomas Curry’s plan to enact a special purpose charter for fintech companies. Access to safe and affordable capital is a key policy priority for Main Street Alliance business owners.
Below is an excerpt from the letter to Comptroller Curry from MSA National Director, Amanda Ballantyne:
“While the growth of the fintech industry presents new opportunities for overlooked businesses to access capital, it also brings considerable risks. To date, irresponsible, and potentially predatory, lending practices have been documented in the online lending market. For instance, average APRs have hovered around 94%, with rates as high as 358%, according to a study by the Opportunity Fund. Fintech lenders have also included hidden or deceptive prepayment charges, opaqueness in repayment policies, and questionable brokerage practices. Not surprising, a 2016 Federal Reserve study reported exceedingly low satisfaction levels among business owners who used online loans (15%), attributable to the high interest rates and unfavorable payment terms of these loans.
For small business owners, the potential for fintech companies to inflict serious harm is even more pronounced since many critical federal consumer protection laws do not extend to commercial loans. Consequently, state laws are the primary, and in many cases, only, line of defense against the lending industry.
Robust and comprehensive federal protections are clearly needed to address the current regulatory gaps. However, rather than serve this function, we believe that the proposed charter--in extending bank preemption to fintech companies--would create a more perilous lending environment for small business owners by weakening existing state protections without offering comparable coverage at the national level.”
The letter warns “the OCC’s proposal would endanger small business owners by extending national bank preemption to fintech companies without offering comparable national protections.”
View the full letter HERE.