GAO Report Underscores Need For a National Fintech Framework

February 4, 2019 at 9:19 am Leave a comment

Image result for tracy wolfson in crowdTo understand this picture read more of the blog.

A recent report released by the GAO underscores why we need a comprehensive federal framework to regulate Fintech. Without such a framework, there will continued to be too many loopholes to harm competition and a lack of regulation that will ultimately harm consumers.

First we need a definition of what Fintech lending actually is. For the purposes of the report and an accompanying blog post, the GAO points out that Fintech technology refers to the use of technology and innovation to provide financial products and services. It further explains that “Fintech lenders are non-bank firms that operate online and may use alternative data…to help determine” credit worthiness. While the definition is a good start, it could easily be used to describe banks and credit unions as well since all lending institutions are using technology to expand lending platforms and many are taking into account increasingly sophisticated lending algorithms which consider criteria far beyond traditional lending frameworks.

What’s going on here is an amalgamation of lending and technology which calls for a new regulatory framework. Let’s face it, the companies providing alternative lending platforms are doing more than brokering loans and the banks that are increasingly relying on these partnerships are moving beyond the confines of traditional banking. They are more like Apple and less like City Bank every day.

Why does this matter? Why not just let the market evolve to accommodate the structure that best meets the needs of the modern banking consumer? Because there are too many competing interests at stake. Page 9 of the GAO’s report outlines the laws and regulations to which Fintech lenders are potentially subject but there’s no single regulator – including the CFPB – which can exercise appropriate oversight over these institutions. The result is that we are engaging in cutting edge lending practices without adequate regard for whether such practices violate fair lending laws for example or needlessly circumvent the policing of practices traditionally left to the states such as the activities of non-bank lenders like mortgage bankers and payday lenders.

Most Exciting Superbowl Moment

For me, the most exciting moment in last night’s Superbowl was finding out whether CBS sideline reporter Tracy Wolfson would safely get out of the mob surrounding Tom Brady and manage to interview him moments after he won yet another Superbowl. I’m all for a defensive football but I think I’d rather watch replays of Bobby Fisher beating Boris Spassky on the Wide World of Sports. At least then there is no hiding the fact that what we were really watching last night was a chess match between two coaching geniuses in Bill Bellchick and Wade Phillips.

Meet The New Boss

President Donald Trump nominated Democrat Todd Harper to take a seat on the NCUA board. If he is confirmed Harper will have no problem finding his way around the office. According to the CU Times, from 2011 to 2017 he directed the NCUA’s Office of Public and Congressional Affairs.

 

Entry filed under: Regulatory, technology. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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