WASHINGTON, D.C.— Better Markets has released a new fact sheet on Bank-Fintech arrangements in conjunction with the filing of a comment letter on the same topic to the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC) and Federal Reserve Board (Fed). Shayna Olesiuk, Director of Banking Policy, issued the following statement:
“Millions of Americans currently use banking services—such as payments, lending, or deposit placement—provided by fintech firms that operate in partnership with banks. Although these partnerships provide convenience and can reduce costs, most users are unaware that these fintechs are almost entirely unregulated and that customer funds can be at great risk if the fintech gets into trouble.
“In just the past few years, there have been multiple instances of fintech companies falsely claiming to be FDIC-insured. The FDIC has sent warning letters to these companies, but has not used its authority to hold the companies or their partner banks formally and publicly accountable. In the bankruptcies of fintech companies Voyager, FTX, and Synapse, accountholders have had to wait months or years before getting any money back. The regulators can and should do better to protect the money of hardworking Americans.
“Better Markets recommends that the banking agencies take action to ensure banks can benefit from fintech arrangements without endangering themselves, the public, or financial stability by:
- Implementing clear and enforceable regulatory standards for banks’ third-party risk management;
- Making more forceful use of examination and enforcement authority over banks’ fintech partners; and
- Requiring reporting by banks of material third-party arrangements.
“Moreover, the FDIC should formally hold fintechs and their partner banks accountable when they mislead the public about deposit insurance.
“The last few years have shown that when bank-fintech partnerships go wrong, they can go very wrong, and losses can add up quickly. Main Street Americans deserve to benefit from the innovation of bank-fintech partnerships but also to be better protected from the associated risks.”
The Comment Letter is available here and the Fact Sheet is available here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.