July 20, 2020

On the tenth anniversary of one of the most comprehensive overhauls of financial services laws and regulation, the Dodd-Frank Act (Dodd-Frank), it is a good time to consider what the next ten years holds for financial services. Dodd-Frank was reactive legislation that addressed the causes and impact of the financial crisis.  It focused on certain activities that could potentially harm consumers and the financial system. 

As we look forward, we have the benefit of lessons learned, but we also face a different set of opportunities and challenges. Despite the headwinds associated with COVID-19, financial services firms are continuing to innovate.  This new technology offers benefits and risks that need to be addressed.  Financial regulators have been active in trying to determine related frameworks for fintech firms. And, unlike Dodd-Frank, industry and regulators are looking proactively to develop rules that will allow for advancement of innovation while mitigating risks. 

Listed below are some of the recent actions taken by the agencies. The pace of action, and coordination among the agencies and industry, is encouraging.  However, there are several areas that need to be addressed. It remains to be seen what can be accomplished in 2020 as we continue to deal with the pandemic and move closer to the election. 

The federal financial regulators have been very active. The Office of the Comptroller of the Currency (OCC), has renewed their focus on federal charter choices for fintech firms and has an open comment period on digital activities.  The Federal Deposit Insurance Corporation (FDIC) recently released a request for information related to a potential public/private standard-setting partnership and voluntary certification program to promote the efficient adoption of innovative technologies at FDIC-supervised financial institutions (see detailed discussion below for more  details). The FDIC also announced a tech sprint to develop a new and innovative approach to financial reporting, particularly for community banks. The Consumer Financial Protection Bureau finalized the long-anticipated rule on small dollar lending, announced a tech sprint to reduce regulatory burden and will be hosting joint innovation hours with the OCC on July 29-30. The Commodity Futures Trading Commission has scheduled a series of events for the fall entitled, “Empower Innovation”. 

There are similar initiatives taking place at the state level and through the Conference of State Bank Supervisors. The New York Department of Financial Services is reviewing and updating their virtual currency regulations to reduce burden and account for evolving technology.  States like Utah and California continue to advance Industrial Loan Company charters for fintech firms.