Congressman Patrick McHenry, the Chairman of the House Financial Services Committee, has reintroduced the Financial Services Innovation Act.
The legislation was previously introduced by McHenry but did not garner sufficient traction to move to the House floor for a vote.
This bill aims to establish federal regulatory “sandboxes” through Financial Services Innovation Offices (FSIOs) at federal financial regulators, allowing entrepreneurs to test new products and services without sacrificing critical consumer protections.
First pioneered in the United Kingdom, the goal is for innovators to be able to experiment in a safe and regulated environment. At the same time, regulators will get exposure to new technology, providing their feedback while learning about entrepreneurship in financial services = a sector in which few regulators have any experience.
McHenry said emerging Fintech firms currently operate under the fear of potential penalties brought by regulators who do not like change or those who simply want to adhere to existing rules – even when it may be to the detriment of positive change for consumers or businesses.
“That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets because we strike the right balance between fostering innovation and consumer protection—this bill will help ensure the United States continues to lead the world in financial innovation.”
The legislation will establish a FSIO Liaison Committee tasked with facilitating the cooperation of each FSIO to ensure that agencies share information and data on petitions and consult with state regulatory entities to provide information and advice to the public with respect to financial innovations and agency regulation.
The Financial Stability Oversight Council (FSOC) must submit a report on the aggregate impact of enforceable compliance agreements entered into under this bill.
This includes the existing regulations or practices that may harm innovation or restrict competition.
The bill would also require FSOC to identify the overlap of agency regulations of financial products or services and issue recommendations for reducing, consolidating, or eliminating such overlap, among other reporting requirements.
The legislation is available here.