Mark T. Dabertin, Gregory J. Rubis and Brian Dolan Quoted in Credit Union Times Article, ‘Fintechs Can Apply for Special Purpose Charter, but Should They?'
Mark T. Dabertin and Gregory J. Rubis, special counsel in the Financial Services Practice Group of Pepper Hamilton, and Brian Dolan*, Director of Marketing, were quoted in the January 27, 2017 Credit Union Times article, " Fintechs Can Apply for Special Purpose Charter, but Should They?"
The OCC has only issued six special purpose charters since 2012, "a reflection of the economy and consolidation in the industry," according to Brian Dolan, marketing director at law firm Pepper Hamilton.
Dolan moderated a webinar on Tuesday that explained what applying for such a charter would entail for a fintech firm, and what being approved for a charter would mean for its operations.
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However, if a state law has a discriminatory effect on the fintech, or would prevent it from conducting business, the law would be preempted, according to Greg Rubis, special counsel in the financial services practice group at Pepper Hamilton.
A special purpose charter could ease some of the burden of following multiple state regulations, but there are other advantages, Rubis explained.
Firms with a charter could export interest rates from their home state, regardless of where they do business, Rubis said. For example, firms that establish Delaware or South Dakota as their home state could use those states’ higher interest rates on loans regardless of where the loan originated.
"We should keep in mind we’re talking about the home state. Unlike a corporation that can have its operations in New York but form under Delaware law, this statutory requirement is that you actually have your home base there," Rubis explained.
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"There really is no such thing as an OCC fintech charter per se," according to Mark Dabertin, special counsel in the financial services practice group at Pepper Hamilton. Rather, the OCC is extending special purpose charters to fintechs.
"Under certain circumstances, [the OCC is] willing to accept charter applications from fintech companies including those companies that have limited activities," he explained, meaning the firm’s activities are limited to certain products or services offerings, not that they’re limited by law or regulation. The OCC is "imposing certain conditions on the approval of the charter, which makes those self-imposed conditions have the force of law."
"Unlike certain special purpose banks that are common today," he said, like trust or credit card banks, fintech firms approved for a special purpose charter "would not be recognized as having a Bank Holding Company Act exemption."
*Mr. Dolan is not an attorney and is not admitted to practice law.