Anti-Fintech politicians Senator Elizabeth Warren and Senator Chris Van Hollen have forwarded a letter to the Office of the Comptroller of the Currency (OCC), US Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) demanding that bank regulators crack down on Fintechs providing bank-like services.
Senators Warren and Van Hollen mention several top Fintechs by name, including; Stripe, Finastra, Synapse, Marqueta, Venmo, Cash App, Yotta, and Chime.
The duo states:
“The rapid growth of these partnerships risks harming consumers while posing a broader threat to the stability of our banking system and the economy. 1 These partnerships package services traditionally offered by banks such as deposits, saving accounts, and debit cards into a fintech substitute that uses BaaS providers to interface with a traditional bank.”
On X, Senator Warren stated, “I’ve got my eye on a growing risk to consumers, and to the stability of our banking system and economy. I’m working to make sure it doesn’t hurt families.
Synapse/Yotta are the bad apples of the bunch having failed, leaving users in the lurch. But it appears that the two Democrat Senators want to throw the baby out with the bathwater because all Fintech must be bad.
Mentioned specifically include BaaS or Banking as a Service platforms as well as FDIC pass-through services that extend account insurance to users. FDIC insurance is frequently included by neobanks (not federally chartered digital banks) in partnership with chartered banks.
The letter claims, “Regulators today rely on partner banks to regulate their fintech and BaaS partners22—but this self-regulatory approach is not working.”
Warren and Van Hollen Demand the following from the regulators:
- Ban entities that provide products only eligible for pass-through FDIC insurance from using the FDIC name or logo in any materials and
- Establish clear and direct rules for nonbank companies that partner with banks to offer deposit-style products, such as BaaS providers and fintech companies, to ensure they are properly safeguarding consumer funds. Directly supervise and examine these entities under the Bank Service Company Act to ensure compliance and conduct enforcement actions against companies that violate these established rules.
They also demand a staff-level briefing by October 18th.
