In December, we looked at ways fintech companies are making inroads into banking: partnering with banks to offer their services, obtaining bank charters, or seeking alternative structures such as the industrial loan company (ILC) charter. This month we are examining some of the regulatory issues that have surfaced with these new entrants.
Fintech Regulation 101
Just as with banks, there is no single licensing or regulatory agency that oversees fintech companies. Depending on their activities, they can be licensed or supervised by local, state or federal regulators on a functional, or activity-based, basis.
Prudential (safety and soundness) regulation and licensing are generally handled at the state level for services such as lending, money transmission and insurance. For example, PayPal, one of the oldest fintech firms, has money transmission licenses in all 50 states and has a regulator for each state or territory in which it operates.
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In response to the many disruptions caused by the COVID-19 pandemic many states have made accommodations for certain licensing requirements across various industries. Last month, in our blog post “Relief from Branch Office Licensing,” we generally reported on the actions taken by many state mortgage finance regulators to temporarily allow licensed mortgage companies and their licensed mortgage loans originators (MLOs) to originate residential mortgage loans from the MLO’s unlicensed home or some other remote unlicensed location. To provide that guidance, we reviewed the mortgage finance licensing laws of each state, the District of Columbia, and Puerto Rico (herein, each a “jurisdiction” or collectively, the “jurisdictions”), called or emailed key licensing regulators in each jurisdiction, and documented our findings in a chart that examined: (i) whether the jurisdiction will allow a licensed MLO to work from
Technology will be at the forefront in financial regulation and licensing this year.
3/4/2021 10:00 AM
AdvocacyNewsState
Financial services companies can expect greater integration of technology by state regulators, according to a speech on 2021 priorities from Conference of State Bank Supervisors (CSBS) President and CEO John Ryan at the Nationwide Multistate Licensing System (NMLS) annual conference in February.
For one, state regulators are advancing the use of “Networked Supervision,” which uses technology, data and uniform practices to strengthen regulation, according to a CSBS news release.
The main elements of networked supervision including assessing, licensing and chartering new businesses and banks faster and improving examinations of licensing businesses and chartered banks, according to CSBS. The program would produce real-time data on business and bank health and consumer protection.
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