Regulatory Guidance Regarding FinTech Products and Services: OCC White Paper and New CFPB Policy Clarify Regulatory Expectations for Financial Institutions and Other Market Participants

Sullivan & Cromwell LLP - April 5, 2016

On March 31, 2016, the Office of the Comptroller of the Currency (the “OCC”), the regulator of federally chartered national banks and savings associations, released a white paper that sets forth the OCC’s perspective on supporting responsible innovation in the federal banking system (the “White Paper”).  The release of the White Paper represents the most significant effort by a U.S. federal financial regulator to provide guidance for financial institutions and companies regarding the development of products and services in the financial technology (“FinTech”) sector and identifies the principles that the OCC plans to use as it continues to develop its comprehensive framework for understanding and evaluating innovative products, services and processes.

The release of the White Paper follows the publication, on February 18, 2016, by the Consumer Financial Protection Bureau (the “CFPB”) of its final policy to facilitate consumer-friendly innovation (the “CFPB Innovation Policy”).  The CFPB Innovation Policy, which was first proposed in October 2014, establishes a new process for financial institutions and companies to apply for No-Action Letters regarding the application of consumer regulations to new products that offer the potential for significant consumer-friendly innovation.  Through this new process, the CFPB intends to permit financial institutions and companies to clarify regulatory uncertainty during the FinTech product development process.

Together, the White Paper and the CFPB Innovation Policy provide financial institutions and companies with important guidance regarding the federal financial regulators’ evolving attitudes towards innovation in the FinTech sector.