Download - FinTech and Consumers - U.S. PIRG · FinTech companies are also using Facebook, Instagram, and other digital marketing applications that combine data and interactive experiences to

, “FinTech and Consumers,” Working Draft of 5/7/2018,

Not for Release or Attribution, Center for Digital Democracy and U.S. PIRG Education Fund

FinTechandConsumers:APreliminaryOverviewofImportant

Consumer,Privacy,SmallBusiness,andCivilRightsIssuesTechnologicalinnovationandtherapidadoptionofmobilephones,otherdigitaldevicesand“BigData”applicationsarebringingsweepingchangestothewaysconsumersengageandinteractwithfinancialservices.Thesedevelopmentsareunleashingfar-reachingdevelopmentsthatwillcontinuetoimpactbusinesses,competition,regulation,andconsumerinteractionwithanduseoffinancialproducts.Numerousregulatorshaveengagedontheissue,withworkshops,whitepapersandproposalsforFinTechregulation.Inthelatefallof2016,thechiefnationalbankregulator,theOfficeoftheComptrolleroftheCurrency(OCC),providedanoutlineofalimited-purposeFinTechcharterthatconsumergroupsandstateregulatorscontendwillpreemptstrongstateconsumerprotections,undercutexistingfederallawsandprecipitatearacetothebottom.1Sincethen,theagencyhasgonethroughthepresidentialandaComptrollertransition,andbeensuedbystateregulatorsforexceedingitsauthority2,butissaidtobepreparingthenextiterationoftheproposedcharter.3InrecentBrookingsevents,formerObama-eraTreasuryAssistantSecretary,ProfessorMichaelBarr,andco-authorsKarenGiffordandAaronKlein,positedadefinition:

Weemploytheterm“FinTech”torefertonewtechnologyandinnovationthatenablesthedeliveryoffinancialservices.ExamplesofFinTechincludetheuseofmobilephonesforthedeliveryoffinancialservicesandtheuseofcloudcomputing,applicationprogramminginterfaces(APIs),openprotocols,enhanceddatastorage,analysisandmanagementcapabilitiestoreducethetimeandcostoffinancialtransactions.4

Klein,inablog,wentontoexplainfurther:

FinTech,themergeroffinanceandtechnology,hasthepotentialtoprovidefinancialservicesfaster,moreefficiently,moreconveniently,andmorecheaplytoeveryone,includingthehistoricallyunderserved.However,theseinnovationsalsohavethepotentialtoproduceproductsthatinefficientlyallocatecapitalandharmconsumers,borrowers,investors,andbusinesses.



FinTechtechnologiesdevelopedfororadoptedforthefinancialservicesindustryarebeingusedforbothconsumer-facingandbusiness-to-businessapplications.FinTechcompaniestakeadvantageofthecapabilitiesof“BigData”practicestoofferonlineservicesthatenablethemtocompetewiththetraditionalbankingandcreditsector.Althoughithasbeenargued,withjustification,thatfinancialinnovationis“nothingnew,”legacyfinancialservicescompaniesunderstandthatadoptingFinTechbusinessmethodsisessentialiftheyaretoremaincompetitiveandrelevantatall.ThereareagrowingnumberofpolicyinitiativesdesignedtofosterthegrowthofFinTechservices.But,thefinancialsystemishighlyregulatedforavarietyofreasonsandFinTechchallengessomeoftheimportantsafeguardsthataddressprivacy,consumerprotectionandthesafetyandsoundnessoftheeconomy.Manycriticalquestionsregardingconsumerprotectionmustberaised.Isthestart-upcultureofmanyoftheseFinTechcompaniesequippedtonotonlyinnovatebuttosafeguardconsumerrightsatthesametime?Arenewconsumerprotections,especiallyforthemostvulnerable,neededorareexistinglawsadequate?Itisimportantthatthelandscapeischangingrapidlyandmanyfintechfirmsthatraisedtheirfirst,orevenfirstandsecond,millionspromisingtodisruptonesectorhavesincepivotedtoanotherbusinessmodel.Awhirlwindofglobalactivityisnowunderway,fueledbybillionsinventurecapital(VC)andotherinvestment.Forexample,thefirstquarterof2018witnesseda“record-breakingnumber”ofVCinvestmentinFinTech,includinginAsiaandLatinAmerica.IntheU.S.,2017witnessedthehighestnumberof“earlystage”investmentinFinTech,with$4.7billioninvestedinthemostrecentsix-monthperiod.5ThegrowthofFinTechalsoreflectsamuchbroadertransformationthatisrapidlyredefiningmorethansimplyhowconsumersapplyforcreditortransferfunds.Nearlyeverythingtheydotoday—fromgroceryshopping,buyingretailandentertainmentproducts,communicatingwithfriends,accessinginformation,andevenvoting—isinfluencedbytheroleofdataanddigitalmedia.Smartphones,whicharethedominatedigitaldeviceandareusedbynearly80percentofU.S.mobilesubscribers,makenearlyanyserviceavailableatanytime,anywhere.Ourmobiledevicesandcomputers,aswellasmanyoftheproductsandservicesweuse—rangingfromshopper-loyaltycardstoATMstocreditcards—arefirmlyconnectedtoavastdata-drivenandintelligentapparatus.Increasingly,informationonindividualsiscontinuouslysweptupintoapowerfulBig-Dataprocessingsystem.Advancesinpredictiveanalyticsandartificialintelligencehavehelpedcreatemorepreciseconsumerprofiles,constructedthroughalgorithms,data,andmarketing“clouds,”enablingthecaptureofanearlyendlessarrayofinformationonourlives.



Therearealsonewwaystomakeallofthisinformation,intheindustry’sterm,“actionable”andpersonallytailored(increasinglyinnear-oractualrealtime).6Since2012,developmentsintheuseofdataanalytics,advancesinhowdigitalmarketingisconstructedanddeliveredtoindividualsandgroups,aswellastheemergenceofnew“one-stop”shoppingdatabrokersiteshavegivenfinancialservicesandothersanarrayofeffectivetoolstoreachandinfluenceconsumer(andpolitical)decision-making.7TherecentcontroversygeneratedbyCambridgeAnalytica’srelationshiptoFacebook,anditsusebytheTrumpcampaign,isaprimeexampleofthechangesthathaveoccurredindatagatheringanduseintheU.S.8TheFacebookrevelationscreatesanopportunityforadvocatesandotherstopressacasefortechnologicalreforms.SucheffortswillbehelpedbythesweepingnewEuropeanUnionprivacylaw—theGeneralDataProtectionRegulation(GDPR)—thatgoesintoeffectonMay252018.TheGDPRwillforcefinancialservicesandotherconsumer-facingcompaniesoperatingintheEUtochangeavarietyoftheirbusinesspractices,includingthecollectionanduseofdata.SinceanumberofthosecompaniesarebasedintheU.S.,therecouldsoonbeanewopeningtopressthemtoadoptchangesmadetosatisfytheEUlawonaworldwidebasis.9Thisshouldbeapartofanagendadesignedtoensurethat21st-centuryconsumerfinancialservicesbetterservethepublicinterest—providingaffordableproducts,adoptingfairandtransparentpractices,anddemonstratingtrueaccountability.Industryleadersareintransition,restructuringtheirbusinessestomaintainorcapturetherevenuenowmadepossiblebythedigitalmarketplace(suchasofferingmobileappsthatencourageconsumerstoapplyforloans,enablingtransactionsviaPayPaltotakeplaceinFacebook’sMessengerapplication,orusing“chatbots”toencouragespendingorofferfinancialadvice).10BoththeyandtheirnewerFinTechcompetitorsareinvestinginordevelopingstate-of-the-artproducts.FinTechcompanies,suchaspeer-to-peerlendersProsper,SoFiandLendUp,havebuilttheiroperationstakingadvantageofsuchdata-drivendigitalapplicationsandconsumerbehavior.Thesecompaniesseekvaryingformsoffavorableregulatorytreatment.WithbothfederalregulatorsandCongresscontinuingtooperateinadministrativetransitionmode,firmsarealsolookingforspecialtreatmentfromstates,whereaso-calledregulatory“sandbox”lawwasrecentlyenactedinArizona;similarproposalsarebeingconsideredinnumerousstates.11



Thereareantitrustandothercompetitionconcernsaspartnershipsandalliancesareformed.Asthefinancialsystemis“reset,”theindustryislikelytobepotentiallyvulnerabletoconsumeradvocacythatlinksthelessonsofthecountry’seconomiccrisistonewthreatsposedbyBigDataanddigitalservices.Leadingcivilrightsandconsumergroups,scholars,andpolicymakers,forexample,havealreadycitedthethreatsposedbythewidespreadroleofalgorithmicdecision-making,invisible“scoring”practices,theroleofdatabrokers,theuseof“alternativedata,”andsimilarpractices.12Another21stcenturyquestionisthis:Howshouldcontrolofdatabeconsideredinantitrustreviews?Ahostofprivacyissuesalsoloomasfinancialcompaniesincreasinglyseekbothtoacquirenewcustomersandtogaina“360-degree”viewofthosecustomerstheyalreadyhave.Cybersecurityconcernsarealsoakeytouchpointforpublicconcern,withdatabreachesroilingbanks,leadingonlinefirms,andeventheFDIC.RecentexamplesofcorporatemalfeasancebycompaniessuchasWellsFargo,LendingClub,andLendUpareusefulexamplesofhowtheconsumerfinancialsystem,withouteffectiveoversightandenforcement,canwreakhavoc.13FundingforFinTechworldwidereached$31billioninboth2016and2017.14AccordingtoBIIntelligence,someofthekeydevelopmentsshapingthegrowthoffinancialtechnologycompaniesandservicesincludethefollowing:

• LegacyplayersandtechnologypartnersaresteppinguptohelpdriveFinTechindustrygrowththroughinvestmentsandbysettingupacceleratorsandincubators.

• GovernmentsarealsoincreasinglysupportingthedevelopmentofFinTechindustries.• Mediaandinvestorattentionisexpandingbeyondalternativelendersandpaymentsfirms

tonewsegmentsincludinginsure-techs,robo-advisors,blockchain,anddigital-onlybanks.• FinTechscontinuetofacechallengeswithcustomeracquisition.• ProfitabilityalsoremainselusiveformanylargeFinTechs,despiteattractinglargevolumes

ofcustomersandcreatingsignificantrevenue.• Tomanagethethreatofdisruption,incumbentsareinvestinginFinTechs,partneringwith

them,hiringthemasvendors,andbuildingcompetitivesolutions.15Consumersespeciallyvaluefinancialcompaniesthatusetechnologytoprovidethemwith“securityservices”;the“abilitytosee[their]financiallifeinoneplace”;thatoffermobilepayments;that“personalizethedigitalexperience”;andthatprovideautoinsurancepricingthatincorporatesthelatesttechadvances.16AsareportfromMcKinseyandCo.explained,“…intheU.S.,alone,85millionMillennials,alldigitalnatives,arecomingofage,andtheyareconsiderably



moreopen[toconsidering]anewfinancialservicesproviderthatisnottheirparents’bank.”These“mobilefirst”individuals“aremoreopentorelationships”thantheproductstraditionallyofferedbybanks.Theyseekfinancialservicesthatprovidethemwithanarrayof“personalized”offerings“ondemand.”17FinTechcompaniesarealsousingFacebook,Instagram,andotherdigitalmarketingapplicationsthatcombinedataandinteractiveexperiencestoinfluenceconsumersandtheirsocialnetworks.Forexample,SoFi,thestudentlendingservice,hasrunseveralFacebookandInstagramcampaignsthatusedmanyadvanceddata-targetingtools,includingonethat“clones”potentialtargetedconsumersbasedonhowtheirbehaviorandbackgroundresemblesknowncustomers(“lookalikemodeling”).TheytrackedtheirFacebooktargetsonlinetoobservehowtheyeventuallyresponded.FacebooksaysthatSoFiachieveda“39%increaseinpre-approvedapplicationsforstudentandpersonalloans.”18KeyConcernsThemanynewdevelopmentsintechnologyandBig-Datapractices,aswellastheemergingplayersinthefinancialservicessector,willlikelydelivermanylastinginnovations,butnotallwilladvanceconsumerprotection.Thereisnothinguniqueaboutmarketplacelendersthatshouldleadtoanyweakerconsumerprotectionsorregulatoryexemptions.Tothecontrary,wefearthatthemarkettodayisdevelopingwithlittleoversightandsomesignsofproblems.Theframingofthedebatebyindustryasinnovationholdingnewpromiseforconsumersshouldcontinuetobechallenged.Itdivertsfocusfromtherealrisksandsolutions,whichrequirestrongconsumerprotectionsandregulatoryoversight.Belowweidentifykeyrisksthatthreatentoundermineequity,justice,andfairness,andspecificallyconsumerrightsandeconomicinclusion,andthataretheresultsofthetrendsintheFinTechindustrythatweidentifiedabove.

1. PrivacyRisksAnongoingandincreasinglychallengingissueconfrontingcitizensandconsumersarenewthreatstotheirprivacyandtheirabilitytocontrolhowpersonalandnon-personaldataabouttheironlineandofflinebehaviorarecollectedandusedbyonlinefinancialservicescompanies.Therearemanynewon-andofflinedatasourcesusedtoclassifyconsumersandtomakepredictionsaboutthem.Forexample,socialmedia,mobiledeviceuse,utilitypayments,orotherpublic-recordinformationareusedinamyriadofways:foridentityverification,fraudprevention,creditrisk



evaluation,underwriting,marketingorprioritizingincomingcustomerservicecallsatcallcenters.19Sophisticateddata-processingcapabilitiesallowformoreprecisemicro-targeting,thecreationofcomprehensiveprofiles,andtheabilitytoactinstantlyontheinsightsgainedfromconsumerbehaviors.

Becauseoftheimportanceofthemobilephoneforaccessingfinancialservicesandforpayingforgoodsandservices,consumersareparticularlyvulnerableregardingtheexploitationoftheirgeolocationinformation.Moreover,mobile-paymenttechnologiesofferthirdparties,banks,andFinTechcompaniestheabilitytocollectmoreinformationaboutthepayments-transactionprocessthanwouldbepossiblewithadebit/creditcard,andtoshareitwithdifferentparticipants,suchasmerchantsandpaymentproviders.20Toappreciatefullytheprivacyrisksinthisnewworld,weneedtorememberthatprivacyhasbothanindividualandagroupcomponent.MostexistingprivacylawsintheU.S.focusontheindividualaspect,protectingpersonallyidentifiableinformationandaiming,moreorlesssuccessfully,toprovideindividualswithcertaincontrolsovertheirdata.Groupprivacyisalsoconcernedwiththeindividualautonomyandtheprotectionofone’sidentity;itfocuses,however,oncharacteristicsaboutthegroupthattheindividualeitherbelongstoorhasbeenassignedto.TheU.S.regulatoryframeworkaddressestheseprivacyrisksinadequately.

2. BiasedDataAnalysisandIncreasedandEntrenchedInequalityviaScoringPerhapsthebiggestrisktoequity,fairness,andjusticestemmingfromnewpracticesinthefinancialservicessectorrelatestothescoringofAmericans.21AllthenewdatapointsthataresoeasilyavailabletothesecompaniesareanalyzedthroughBig-Dataalgorithms.Theyareusedtoclassifyandscoreindividualsusingpastdatatomakefuturepredictions.Regulatorsmustcloselyexaminethesenon-transparenttools.

TheuseofclassifyingandpredictivealgorithmsinFinTech(asinotherareas)canbethesourceofbiasandhaveadiscriminatoryeffectinatleasttwoobviousareas:thedatainputcanbebiasedorcontainerrors,andthealgorithmsandclassificationschemescanbebiasedandcanfurtherentrenchinequality.Whilecompanieshaveanincentiveto“getthemodelright,”theevidenceisoverwhelmingthatthesemodelsoftenproducebiasedanddiscriminatoryoutcomes.22“Gettingthemodelright,”infact,mightexacerbatetheseundesiredoutcomes.TheEqualCreditOpportunityActmustalsocontinuetoplayanimportantroleinpreventingdisparityordiscrimination.Animportantnewreportpositsthefollowingaboutautomateddecisionmaking:23



“Algorithmsalsoinfluencetheproductionanddisseminationofnews,socialandprofessionalinteractionsamongpeople,thedeliveryofsocialservices,andthestabilityoffinancialmarkets.Thesetrendshavemadealgorithmsobjectsofconcernbeyondtheconfinesofcomputerscience.”

Recognizingthatservingsocalled“thin-file”consumerscanbegoodbusiness,somecompanieshavedevelopedproductsthatusenon-traditionaldata,suchas“cable,landline,mobileandutilitypayments,alongwithselectpublicrecordinformation.”24Whilealternativecreditscoringcanbeaboonfortheunderbanked,thereneedtobestandardsandsafeguardstoensurethatanynewdataareusedappropriately.Newdatasourcesmaybebiasedandtheirusemayleadtounintendedconsequences.Forexample,somecreditscoringcompaniesarepromotingfull-filereportingofutility-paymentdatatocredit-reportingagencies.Butmassincorporationofthesedatacouldgivemillionsoflow-incomeconsumersbadorworsecreditscoresandcouldunderminestateconsumerprotections,suchasprohibitionsagainstwintertimeshutoffsforvulnerableconsumers(e.g.,theelderly).25

Scoringandprofilingtechniquesarebytheirverynaturediscriminatorytools.26Theyallowunparalleledkindsofsocialsortingandsegmentationthatcouldhaveunfaireffects.Thesearenotanykindofclassifyingandpredictivealgorithms,however;inthecommercialspacethemodelsaimtosortpeopleaccordingtotheirabilitytomaximizeprofitortominimizerisktotheorganizationthatdeployssuchtechniques.27Sortingindividualsaccordingtotheirhighestcreditriskorlowestpotentialtocontributetothebottomlinemayfurtherstratifyconsumers.28Whilethispracticeisrationalfromthepointofviewofthecorporation(asitmaximizesprofitandreducesrisktothecompany),itisnotnecessarilyefficient,fair,orjustfromasocialpointofview.So,newformsofbothovertandcovertdiscriminationmaybeoneoftheconsequencesthatscoringhasoneconomicallyvulnerableconsumers.

Whileindustryhasarguedthatincreasedautomationwillhelpexpandaccesstocreditandlowercostsoverall,creditmodelsthataremore“accurate”mayleadtoincreasinglystratifiedoutcomes,asitwillleavethoseatthebottompotentiallyexcludedfromcreditforever.Modelsthatjudgeindividualsagainstgroupprofilesbasedonpastdatainevitablyincorporateelementsofpastinequalityanddiscrimination.Communitiesofcolor,inparticular,arethusmostvulnerable.29Unlessadditionalpoliciesareputinplacetoaddresstheseconsequences,inequalityislikelytobecomemoreentrenchedthemorewerelyonmodelsforriskevaluations.30



3. PriceDiscrimination

Big-Datapracticesalsoallowfirmswithpricingpowertoidentifythehighestpriceaconsumeriswillingtopayforagoodorserviceandchargeaccordingly.Thepracticeupendsthecurrentdistributionofwealthbyallowingfirmstochargethehighestpossiblepricestoeveryone.

4. UnfairandDeceptiveMarketingPractices

Financialservicescompanies,includingleadingbanksandFinTechcompanies,usemanyofthelatestdata-drivendigitalmarketingtools.Thisincludestheuseofdata-driventargetingplatformsthatmakedecisionsin200millisecondswhetherandhowtotargetanindividual,regardlessofherdevice.31Thecombinationofpowerfulwaystogatherandusedata(suchasleadgeneration)alongwithalluringandpersonalizedinteractiveapplications,areusedtoidentifyandtargetconsumersinrealtime.Thesepracticescanfosterconsumerbehaviorsthatarenotinthebestinterestoftheindividual,andalsoraiseconcernsabouttheuseofdataprofiling.

Unfairanddeceptivemarketingpracticesalsoincludethepracticesofsocalledleadgeneratorsthatsellsensitivefinancialinformationandotherconsumerdatatobusinessesthatofferriskyfinancialproductsandothercontroversialservices,suchaspaydayloans.Unregulatedonlineadvertisingpracticesfacilitatepracticesthathitthefinanciallymostvulnerablethehardest.32

5. ThreatstoConsumersandSmallBusinessesItisimportanttounderstandthatsmallbusinessadvocatesareraisingsimilarconcerns.Aleadingadvocacygroup,MainStreetAlliance,joinedcommentstotheOfficeoftheComptrolleroftheCurrency(OCC)onFinTechmakingthefollowingpoint:

Unfortunately,webelieveinnovationisalreadyoutpacingregulationandoversight,andthereareseveralpiecesofinformationtosupportthis.Inthemedia,onlinesmallbusinessloanshavealreadybeencomparedtosubprimemortgages.[…]

ThecommentgoesontocitetoworkbytheauthoritativeChicago-basedWoodstockInstitute:

TheFederalReserve’s2015SmallBusinessCreditSurveyreportsthatonly15percentofsmallbusinessesthattookoutloanswithanonlinelenderweresatisfiedwiththeirexperience.And,Woodstock’sanalysisof15smallbusinessloancontractsfromonlinelendersshowedAPRsrangingfrom26percentto347percent.Againstthisbackdrop,regulatoryreformseemspastdue.AdvocatesinIllinois,includingWoodstock,areadvocatingforlegislationthatwouldcreatearegulatoryregimefornon-banksmallbusinesslenders.33



6. PushbacksFromLegacyBanks;SomeValid,SomeNotTheDodd-FrankAct,Section1033,requiresthatconsumersbegivengreatercontroloverthesharingoftheiraccountinformation,tofacilitatethedevelopmentofnewapplications.Legacybanksraisemanyconcerns.Some,includingtheargumentthataccessbythird-partydataaggregatorstoaccountinformationposesriskstosafetyandsoundness,aremorevalidthanothers.Whenarebankssimplytryingtodefendtheircustomerbaseandopposecompetition?Tosomeextent,argumentsoverrisksfromconsumersgrantingpasswordcredentialstoscreenscrapingfirmsarenowmorereasonableandconcernhowtosetupsaferApplicationProgrammingInterfaces(APIs)fortransferringinformationtoaggregators.34Nevertheless,aggregatorsandconsumerscontinuetoraisecomplaints.35

TheRegulatoryandPolicyLandscapeWeanticipatedthat2017wouldbeasignificantyearforhowFinTechwillbetreatedbythenewadministration,Congress,andregulators.FederalregulatorshadsignaledtheirinterestinsupportingthepromisesoftheFinTechsectortoconsumers.36Theygenerallyhavewelcomedthepromiseoffinancialinnovation,expectingthatsuchdevelopmentscanprovidebetter,safer,moreaffordable,andmorewidelyavailablefinancialproductsandservices.ManyFinTechfirmscontinuedtopressureagencies,includingtheCFPB,toprovideguidanceonwhatproductscanbedevelopedwithoutcomingintoconflictwithregulations.37However,duetotransitionsanduncertaintyaboutleadershipofmostfederalagencies,notmuchhappenedinWashington,somostactionwasinthestatesandcourts,asnotedabove.Meanwhile,thestatusoftheOCC’srumoredfintechspecialcharterremainsunclear.

• OfficeoftheComptrolleroftheCurrency(OCC)TheOCCissuedawhitepaperinMarch2016,inwhichtheagencyoutlinedhowregulatorsmightencourageinnovationwhileensuringsafetyandsoundness.38Thereportcorrectlyframedthepolicyissuesinsupportofresponsibleinnovationinthefederalbankingsystem.Butinnovationisnotauniformlypositivething.Thekeyistobesupportiveofresponsibleinnovationthatimprovesliveswhilemaintainingrobustconsumerprotection.

SeveralpublicinterestorganizationsaskedtheOCCtobe“vigilantinadoptionofrulesandprocedurestopreventsuchunfair,deceptive,andabusiveuseofinnovationfromcausingwidespreadharm,asithasintherecentpast.”Amongotherthings,theyaskedtheOCCtoensurethatinnovationdoesnotresultinalackoftransparencyandaccountability;emphasizedthecontinuedimportanceofbrick-and-mortarbranchesforlower-andmoderate-incomepeople;and



askedthatthepublicbegivenaccesstodataaboutinnovationsincludinginformationaboutthenatureofthetechnologyandwhoitisaffecting.39Subsequently,theOCCannouncedthatitwouldestablishanOfficeofInnovation,tobeacentralpointofcontactandclearinghouseforbankandFinTechrequestsstartingin2017.40Itsfintechmaterialsareprimiarlyarchivedhere.41Whilesuchanofficecouldbehelpful,itmusthaveacoreconsumer-protectionmission.Itshouldnotprimarilybeanadvocateforcompaniesthatarelookingtoloosenconsumer-protectionregulations.

TheCharter:OCC,thefederalregulatorforbanksthatcanoperateacrossstatelines,earlyonalsoexpressedinterestingrantinganewtypeofspecial-purpose“nationalbank”charterforfinancialtechnologyfirms,includingfirmsthatengageinlendingandotheractivitiesbutdonottakedeposits.42FinTechfirmsdonotlikestate-by-statelicensingandwouldprefertohavetodealwithonlyoneregulator.Insteadofhavingtofollowregulationsin50states,theyemphasizethevalueofInternet-basedtechnologiesdesignedtoletthemreachcustomersregardlessofgeography.43Thesolepurposeofsuchacharter,however,wouldbetopreemptstateconsumer-protectionlaws,whichisawhollyinappropriatereasontoprovideafederalcharter.Indeed,stateregulatorsrebelledagainstthisidea,citinglackofstatutoryauthority,anOCChistoryofpreemptingstateconsumer-protectionlaws,andanapproachthatwoulddistortthemarketplace.44Again,smallbusinessesalsoopposethegrantingofa“limitedpurpose”orspecialfederalchartertoFinTechcompaniesthatwouldpreemptstatelawsandregulations.45

In2017,theOCCissuedafurtherwhitepaperexplainingconditionsrelatedtotheissuanceofspecial-purposechartersforfintechs,

butithasnotyetissuedaruleoracceptedapplications.46

SomebankshavenotbeeninsupportofaFinTechchartereither,asitcouldgiveFinTechfirmsanadvantageoverthebanks,asthesenewlycharteredcompanieswouldbeexemptedfromcertainregulationsthatbankshavetofollow.Moreover,OCC’slegalauthoritytocharternon-depositorylendersunilaterallyandwithoutCongressionalassentisdoubtful.47

• TheConsumerFinancialProtectionBureau

TheConsumerBureauseekstopromoteresponsiblefinancialinnovation.IthascreatedProjectCatalysttoworkwithFinTechs.TheCFPB’sProjectCatalystreportissuedinOctober2016underformerdirectorRichardCordrayhighlightedmarketdevelopmentsthathavethepotentialtoproducebenefitstoconsumers.48



Ithasalso,underSection1033oftheDodd-FrankAct,encouragedthedevelopmentofdataaggregatorstogiveconsumerscontroloftheirinformation.Section1033hascreatedsometensionbetweenlegacybanksandFinTechs.On17November2016,theConsumer(CFPB)hadannouncedarequestforinformation(RFI)tobetterunderstandthebenefitsandrisksassociatedwithmarketdevelopmentsthatrelyonaccesstoconsumerfinancialrecords.49FormerCFPBDirectorCordrayhadconveyedstrongsupportfortheabilityofconsumerstoaccesstheirfinancialdata,andexpressed“graveconcerns”aboutreportsthatfinancialinstitutionsareseekingtolimitsuchaccess.50AccordingtotheWallStreetJournal,thisisonepartoftheDodd-FrankActthatsomefirms,fintechs,wantpreserved.51Section1033states,inpart,thatbanksmust:

“makeavailabletoaconsumer,uponrequest…informationrelatingtoanytransaction,seriesoftransactions,ortotheaccount”and“inanelectronicformthatcanbeusedbycomputerapplications.”

Theissueofdataaccesshasalsoraisedconcernswithconsumersandsomedataaggregatorfirms(whichlinktheconsumer’sbankrecordstohisorherpreferredbudgetingormoneymanagementtools)thatbanksarepurposelyslowingdatatransferormakingapplicationsdifficult.SomepressincludestoriesonYahooandBankrate.52TheYahoostorynotesthatwhilebanksmayhavelegitimateconcernsoverthesafetyandsoundnessoftheiraccountdata,theirbiggerconcernmaybelosingcustomers:

“Datasharingisn’tjustaboutconsumersowningtheirowndata,JasonFurman,aprofessoratHarvard’sKennedySchool,toldYahooFinance.It’salsoaboutcompaniestryingtostymiecompetition,whichhurtsinnovationandwagegrowth,saidFurman,formerchairoftheCouncilofEconomicAffairsunderPresidentBarackObama.”

In2017,theCFPBissueditsfirstno-actionlettertoafirm,calledUpstart,proposingtousealternativedatatomakecreditdecisions.53

• CongressWhileitisyetunclearhowthisissuewillplayoutunderanewTrump-appointedcomptrolleratthehelmoftheOCC,theremightstillemergeanenacted2018billinCongresstofurtherhelpFinTechfirmsgainground.



AHouseResolutionintroducedinSeptember2016,whichhadbipartisansupport,wouldcreateaninnovationofficeinanumberofgovernmentagenciesdedicatedtoFinTech,aswellasasystemforcompaniestoapplyforprotectionfromregulatoryenforcementactionsastheydevelopnewproducts.54AndDemocratscouldpossiblysupportthebillbecauseFinTechmightbeseenasawaytoreachunderbankedandunbankedconsumers.55SimilarbillsintroducedinthecurrentCongressincludeHRH.R.5036,theFinancialTechnologyProtectionActandH.R.4752,theFinancialTechnologyInnovationandDefenseAct.However,ofgreaterconcerntoadvocatesarebillssuchasH.R.3299,so-called“validwhenmade”legislationwhichhaspassedtheHouseanditsSenatecompanionS.1642.Theso-calledProtectingConsumers'AccesstoCreditActof2017wouldmakeiteasierforpaydaylendersandothernonbankstouserent-abankarrangementstoevadestateinterestratecapsbyoverturningacourtdecision.Also,HR4439,theso-called“truelender”bill,wouldallowpaydaylendersandhigh-cost“marketplacelenders,”touseapartnerbank’schartertoevadestateinterestrateceilings.56Thebillwouldeliminatelong-standingprotectionsagainst“rent-a-bank”schemes,providingabackdoorforhigh-costlendersintothe15statesandtheDistrictofColumbiathateffectivelybanpredatoryhighcostlendingthroughusurylimits.

• FederalDepositInsuranceCorporationInJuly2016,theFDICissuedExaminationGuidanceforThird-PartyLending,supplementingexistingguidanceforManagingThird-PartyRisk.57TheFDIC’sguidanceaimedtoensuresafety,soundness,andconsumercompliancewhenbanksconductaspectsoflendingthroughabusinessrelationshipwithathirdparty.TheFDICemphasizedthatbanksmusttakefullresponsibilitytoensurethatallaspectsofthelendingprocesscomplywithconsumer-protectionlawsanddonotposeunduerisks.58

InSeptember2017,theFDIC’s17thAnnualResearchConferencefeaturedanacademicpanelon“FintechandTraditionalBanking.”59Alsoin2017,FinTechstudentlenderSoFiappliedforaUtahindustrialbankcharterandFDICinsurance,thenwithdrewitsapplicationafteramanagementchange.60

InMarch2018,theFDICsettledwithCrossRiverBankandaffiliatedentities,includingaFinTech,overunfairanddeceptivepracticesrelatedtomarketingofdebtconsolidationloansfromFreedomDebtRelief.Thesettlementincludedaset-asideof$20millionforestimatedconsumerrestitutionaswellasover$1.1millionincombinedcivilpenalties.61Afewweekslater,thebankissuedapressreleaseafterwinningaFinTechindustryaward.62



InMay2018,theFDIChelda“ForumontheUseofTechnologyintheBusinessofBanking.”Fromthepreparedremarks63ofChairmanMartyGruenberg:

“Inadditiontodevelopmentswithinbanks,newtechnologiescontinuetogeneratepotentialcompetitorstotraditionalbanks.Thisnon-bankcompetitionarisingfrominnovationsisnotnew.Nonbankfinancialcompanieshavecompetedalongsidebanksfordecades,andbankswillneedtocontinuetoadapttochangesinthecompetitivelandscape–regardlessofwhetherthosechangescomefromtechnology-focusedcompaniesorfromothernon-bankfinancialfirms.Toensurethatwearepreparedtounderstandandaddressthechanginglandscapeinfinancialservicesandthewaybanksuseandadapttonewtechnologiesinourrolesasbanksupervisor,depositinsurer,andreceiveroffailedinstitutions,theFDIChasdedicatedsignificantresourcestoidentifyingandunderstandingissueswithrespecttoemergingtechnologiesinbanking.[…]Thislastissue–economicinclusion-isofparticularinteresttousattheFDIC.”(emphasisadded)

• FederalTradeCommission

TheFTCcontinuestoplayaroleinexaminingthebenefitsandrisksoftheFinTechsector,frommobilepaymentstovirtualcurrenciestocrowdfundingandmore.InApril,theFTCsuedpeer-to-peerlenderLendingClubover“hiddenfees.”64ThecommissionusesitsauthorityundertheFTCActandotherlawstobringlaw-enforcementactionsagainstcompanieswhosedeceptiveorunfairactionsharmconsumers.TheFTChasrecentyissuedconsumerfactsheetsonscamsrelatedtocryptocurrencyandhasscheduledaChicagoworkshopforlateJune.65

TheFTCmaintainsmuchofitsFinTechworkonawebpage.66Theagencyhasconductedaseriesofworkshopsonpeer-to-peer(P2P)lendingandpaymentsystemsandcrowdfunding,andhasexaminedtheroleofBig-Dataanalyticsinharmingconsumers,particularlylow-incomeandunderservedpopulations.67TheFTChasscheduledaworkshoponcryptocurrencyscamsforJune2018.68Fromitsrelease:

“Asconsumerinterestincryptocurrencieshasgrown,sohasinterestfromscammers,whoarealwayslookingfornewwaystotakeadvantageofconsumers.Scamsinvolvingcryptocurrenciesincludedeceptiveinvestmentandbusinessopportunities,bait-and-switchschemes,anddeceptivelymarketedminingmachines.TheFTChasworkedtoeducateconsumersaboutcryptocurrenciesandholdfraudstersaccountable.”

Also,theFTC’s2016BigDataReporthadsummarizedhowpotentialinaccuraciesandbiasesinBig-Dataanalyticsmightleadtodetrimentaleffectsforlow-incomeandunderservedpopulations.



BigDatamay,forexample,resultinmoreindividualsmistakenlybeingdeniedopportunitiesbasedontheactionsofothers,createandreinforceexistingdisparities,assistinthetargetingofvulnerableconsumersforfraud,mayresultinhigher-pricedgoodsandservicesforlowerincomecommunities,andmayweakentheeffectivenessofconsumerchoice,accordingtothereport.69

• U.S.SecuritiesandExchangeCommissionJumpingintothefray,theSECheldafirstforum70exclusivelyfocusedontheimpactoftheFinTechmovementoncapitalmarkets,addressingautomatedinvestmentadvice,blockchainanddistributed-ledgertechnology,crowdfundingandmarketplacelending,andinvestorprotection.TheSEChasalsolinkedallitsworkonFintechonaSpotlightwebpage.71Issuesincludewhenblockchainfirmsshouldberegulatedassecurities(theagencysaysonetestshouldbewhencryptocurrenciesconductan“InitialCoinOffering”similartoaIPO.)Theagencyhasalsoweighedinonrobo-advisors72andissuedarulefollowingCongressionalpassageofcrowdfundinglegislation.73

• DepartmentoftheTreasuryTheObamaTreasuryDepartmentreleasedamajorwhitepaperbackin2016on“OpportunitiesandChallengesinOnlineMarketplaceLending.”Theagencyhadsolicitedcommentsfromstakeholders,includingconsumergroups,ontheroleofFinTech.Amongitsfindingswerethatthe“UseofDataandModelingTechniquesforUnderwritingisanInnovationandaRisk,”explainingthat“whiledata-drivenalgorithmsmayexpeditecreditassessmentsandreducecosts,theyalsocarrytheriskofdisparateimpactincreditoutcomesandthepotentialforfairlendingviolations.Importantly,applicantsdonothavetheopportunitytocheckandcorrectdatapotentiallybeingusedinunderwritingdecisions.”Thereportalsoconcludedthatwhilethereisan“opportunitytoexpandaccesstocredit,”manyofthepracticesoftheindustry(includingunderwritingtools)“remainuntested.”Treasurycalledfor“greatertransparency”(forbothborrowersandinvestors)andforagreaterrolebythefederalgovernmenttomonitorindustrydevelopmentsandalsotofostermoreeffectiveandfairlendingpractices.74

In2017,inresponsetoaTrumpExecutiveOrder,theStevenMnuchin-ledTreasurywastaskedtoissueaseriesofreports,includingoneexpectedsoonthatwillmakerecommendationsonFintech.75Notsurprisingly,anorganizationrepresentinghigh-costonlinelendersispushingTreasurytoimposeafederalcharterwithweakregulation.76

Inalastminuteefforttoinfluencethatreport,expectedinJune,theAmericanBankersAssociationissuedaFintechpaperonMay7th.Thepaperpredictablycallsforlessregulationofbank-third



partyrelationships,passageofthe“validwhenmade”legislationdiscussedabove,afederalsandbox,andotherbank-friendlyFintechproposals.77

• ConferenceofStateBankSupervisors:Inadditiontobringingseverallawsuits(whichfailedastheissueisnotyetripesincetheOCChasnotissuedaregulationletalonegrantedacharter)againstthethreatofanOCCspecialcharterthatpreemptsstrongerstateconsumerlaws78,theCSBS,comprisedofregulatorsthatnotonlyregulatestate-charteredbanksbutalsonumerousnon-bankfinancialfirms,hasbeenextremelyactive.TheCSBSprominentlymaintainsaVision2020websiteonresponsiblefintechregulation.79

• StateAttorneysGeneralandtheStateLegislaturesInOctober2016,representativesoftheconsumerprotectiondivisionsoftheAGsfromnearlyallthestates,aswellasofficialsfromtheFTCandCFPB,mettodiscussandcoordinateactivityonarangeofissuesaffectingconsumers.ThemeetingwassponsoredbytheNationalAssociationofAttorneysGeneral(NAAG).KeypanelsatthemeetingaddressedstateinvolvementinFinTech,paydaylending,andgrowingthreatsfromabusivestructuredsettlements.“FINTECH—TheNewFrontier,”inparticular,wasteedupforprominentdiscussionandincludedbriefingsbytheFTC,theUtahDepartmentofFinancialInstitutions,andacademics.AparticularthemeemergedthatmanyAGsbelievetheyalreadyhavethetoolstoregulateandpursuelegalmattersregardingFinTechunderstateconsumer-protectionstatutesgoverningunfairordeceptiveactsandpractices(“UDAP”laws),notwithstandingthatnewproductsmaynotbesubjecttolawsspecificallyaddressingthem.EffortstopreemptstateactionsandregulationswithrespecttoFinTech,suchasproposedbytheOCC,appeartobestronglyresistedbythestates.80Thisyear,theArizonaAG,MarkBrnovich,hassuccessfullypushedforthenation’sfirstsandbox(light-touch)regulationofFinTech.81TheFintechUniverse:AFly-AroundOfSectorsandCompaniesNOTE:Thenextversionofthisbackgrounderwillincludedetailsonsomeofthefirmslistedbelow.Therearemanywaystodefineandcategorizefintechcompanies.Thefielditselfmaybedefinedas“anindustrycomposedofcompaniesthatusenewtechnologyandinnovationwithavailableresourcesinordertocompeteinthemarketplaceoftraditionalfinancialinstitutionsandintermediariesinthedeliveryoffinancialservices.”82Thetermhasalsobeenappliedtobroaderapplicationsoftechnology,suchasBitcoinor,moregenerally,blockchaintechnology.Newtech-



centriccompaniesintheinsurancesectorhavealsobeensimilarlydescribed,butaremoreoftenreferredtoasInsurTech.TheFinTechspacecanbedividedintothevariousbusinesssectorsacompanyoperatesin(e.g.,InsurTech);dividedbythetypesofbusinessprocessesitsupports(e.g.,payments,investments,financing);bythecustomersegmentstheFinTechfirmtargets(e.g.,retail,privateandcorporatebanking);bythetypeofinteractionstheservicefacilitates(e.g.,business-to-businessorbusinesstoconsumer);orbythemarketpositionitholdsandwhetheritprovidesacomplimentaryoracompetitiveservice(e.g.,complimentarypersonalfinancemanagementorcompetitivesolutions,suchaspeer-to-peer).83Ingeneral,themostsuccessfulFinTechcompaniesappeartobecustomercentricandsimpletouseandunderstand,convenientlyavailableonline,mostlyviamobileapps.Thesecompaniesarealsotypically“legacy-free,”abletodevelopflexibletechnologysolutionsormanagementstructureswithminimalexpenses.Insteadofinnovatingonlyoneaspectoffinancialservices,theytendtoinnovateacrossasetofpractices,anddevelopnewbusinessmodels,productsandservicesanddeliverymodels.Useofalternativedatasourcesor“smartdata”isanotherhallmarkofFinTechcompanies’sbusinesspractices.84SomebusinesscommentatorshavesuggestedthatthebusinessmodelsofFinTechstartupsarenotsustainable,andthatcompaniesareabletogrowandfunctiononlybecauseoftheVCandcorporatefundingstreams.85HerearesometypicalwaystocategorizeFinTechfirmsandsomesummariesofafewofthefirmsineachcategory:

1. MARKETPLACELENDING:a. DirectLenders:Sofi,Kabbage,LendUp,CANCapital,OnDeckCapital,Earnest,Zest

Finance,Zopa,Tala,CommonBond.b. PlatformLenders:Prosper,LendingClubCorporation,Upstart,CircleUp,Funders

Club,Fundera.2) PAYMENTSANDBILLING:Venmo,Square,LevelUp,Affirm,AztecExchange,EarnUp,iZettle,Stripe,Klarna3)DIGITALWEALTHMANAGEMENT/PERSONALFINANCIALMANAGEMENT:Betterment,Mint,Wealthfront,Addepar,PersonalCapital,Riskanalyze,HelloWalle4) DISTRIBUTEDLEDGERTECHNOLOGY:Chain,Coinbase,Xapo5) MONEYTRANSFERREMITTANCE:WorldRemit6)RETAILBANKING/NEOBANK:Simple,Gobank,ally.7)INSURTECHs:Metromile,Lemonade.8) DATAAGGREGATORS:Plaid,Yodlee,MX.



NextStepsAspartofadvocacyconsumerandcivilrights-basedstrategythataddressestheroleofdataanddigitalapplications,thereisaneedforthedevelopmentofacollaborativeresearchagenda.TheBigDatapracticesweobserveandthepotentialriskstoprivacyandconsumerprotectioncutacrossallsectorsoftheeconomy.Sectorbysectorpolicysolutionsareunlikelytobeeffective,asdataknowsnoboundaries.Still,weneedtobetterunderstandtheroleandimpactofcurrentandemergingfinancialindustrypracticesonconsumers.Whatarethetechnologies,datasources,partnerships,andalliancesthatdefinethelandscape?Howdoemergingbusinesspracticesthatpromotedatasharingamongamultitudeoffirmsimpactthedevelopmentofservicesaswellasharmindividualandgroupprivacy,andhowdotheyimplicateexistingconsumerprotections,andsmallbusinessinterests?Whichadditionalprotectionsareneeded?ThatCFPBProjectCatalystreportissuedinOctober2016underformerdirectorRichardCordraymadethefollowingpoints,highlightingmarketdevelopmentsthathavethepotentialtoproducebenefitstoconsumers.86TheagencygleanedtheseinsightsfromresearchandbyengagingdirectlywithFinTechstart-upcompaniesandotherstakeholders.Thereportemphasizedtheimportanceofensuringthatconsumerprotectionsarebuiltintoemergingproductsandservicesfromtheoutset.Theagencyidentifiedthefollowingwaysinwhichinnovationscanserveconsumers:

• Expandaccess:Facilitatingfinancialinclusionandmakingproductsandservicesavailableto

consumerswhoareunderserved,lockedoutofthebankingsystem,orhaveuniqueorspecialneeds.

• Improveconsumercontrol:Empoweringconsumerstomakeday-to-daydecisionsoradoptspendingandsavingshabitsthataremoreconsistentwiththeirlong-termaspirations.

• Reduceprices:Drivingdowncostsforconsumersthroughincreasedcompetitionoradoptionoftechnologiesthatreduceoperatingexpenses.

• Increasefeaturesandfunctionality:Addingorimprovingfunctionalitysothatconsumerscanbenefitfromnewfinancialservicesorfinancialservicesthatworkbetter,areeasierorquickertouse,oraremorewidelyavailable.

• Enhancesafetyandsecurity:Enhancingthesafetyandsecurityofproductsandservices,includingbetterdefensesagainstdatabreaches,mechanismstoavoidorreduceerrors,andmoreefficientcorrectionofmistakesthatdooccur.

• Promotetransparency:Improvingtransparencyandconsumerunderstanding,especiallytohelpconsumerschoosethebestproductsandservicesforthemselvesandusethemsuccessfullywithoutunnecessarycostorcomplication.87



Conversely,theauthoritativeNationalConsumerLawCenterhassummarizedanumberofconcerns:

• UseofconsumerdatainwayspotentiallyinconsistentwiththeprotectionsoftheFairCreditReportingAct,privacyrights,andfair-lendinglaws.

• Skewedoriginationincentivesthatcouldleadtopoorunderwriting.• Themandatoryordefaultuseofpreauthorizedelectronicpayments,whichcanweaken

consumers’controlovertheirbankaccounts,causebankaccountclosures,andcreateincentivesforweakerunderwriting.

• Evasionofstatelaws,includingusurycaps,consumer-protectionlaws,andlicensingandoversightrequirements.

Hereareanumberofotherconcerns:Whatsafeguards,ifany,havebeenputinplaceregardingthepotentialimpactofdiscriminatoryoutcomesarisingfromdataprocessing?Howaretheleadingcompaniesusingtheseproductstotargetvulnerableconsumers,includingthoseforwhomEnglishisnottheprimarylanguage.What“bestpractices”havebeenadoptedintheU.S.andinothercountriesregardinghowtoensurethedevelopmentofaffordableproducts,fairtreatment,andadequateregulation?HowareregulatorsmorefavorabletoFinTech(suchastheUnitedKingdom’sFinancialConductAuthority)dealingwiththeindustry?WhatproblematicmodelsandpolicieswouldwewanttoopposeorchangeifproposedfortheU.S.?Howcanthecritiquesfromothers,suchasGermany’sFederalFinancialSupervisoryAuthority(BaFin),beusedtoourbenefit?Howdoweensurethatfinancialservicesofferedthroughmobiledevicesandappsarefairandprovideformeaningfulconsumerdecision-making?Howdoemergingtechnologies,includingtheInternetofThings,impactconsumerfinancialservices?Forexample,as“wearable”devicesbecomemorepopular(andperhapsgiventoconsumersforhealthreasons),theywillalsoserveaswaystopayforproducts.Whatwilltheirrolebeandwhatsafeguardsarerequired?Whatconsumer-lendingandmobile-payment/financial-transferproductsofferthemostrobustsafeguards,includinglowpricing,datasecurity,andprivacy?



Howarethenew“RegTech”companies,whichautomatethecompliancerequirementforfinancialcompanies,incorporatingconsumerprotectionintotheirproducts?Howdoweassessthisnewwaybeingusedtoaddressregulations?Becauseofthegrowthofthedata-drivenfinancialmarketplace,privacysafeguardsareasimportantasever.Whatprivacyprotectionsareneededtosafeguardbothindividualandgroupprivacyrightsmosteffectively?TheFairCreditReportingAct(FCRA)shouldnotonlyapplytotheuseofdataforcredit,insurance,oremploymenteligibility,butalsoforadvertisingandtargetedmarketing,and,infact,foranykindofscoring.AreFCRA-typeprotections(access,correction,disputeresolution)enough,ordoweneedtohaveadditionalsafeguardsagainstdiscriminatoryeffects?RegulatorsmustcontinuetoenforcetheElectronicFundsTransferAct’sprotections,includingitsprohibitiononconditioningloansonarequirementthatconsumersautomaticallyagreetoloanpaymentsbyelectronictransferorpreauthorizedACH.88Howdoweregulatedatabrokersappropriately?HowdowebroadenfinancialinclusionandincludethosehistoricallydiscriminatedagainstwhoarelikelytobemostharmedbyBig-Datapractices?Shouldsocialmediadatabeusedtoevaluateeligibilityforfinancialservicesorinsuranceproducts?(Note,thisisbehavioraldataunrelatedtotheproduct.)Shouldsocialmediadatabeusedtotargetadvertisingforfinancialservicesorinsuranceproducts?Shoulddiscountsforfinancialorinsuranceproductsbegiveninexchangeforrevealingadditionalpersonalinformation?(Noteherethatduetothesocalled“unravelling”effectandtheunderminingofthewholeconceptofinsurance—sharingrisk,ratherthansortingoutthelowfromthehighrisk—inmymindtheansweris“no.”)Whatstandardsorcriterianeedtobeinplacetoensurethatanynewdataforcreditevaluationsarebeingusedappropriately?Fairness,effectiveness,relationshiptoloanproduct,unintendedconsequences?



Whentheapplicationofprofilescausesharm,theliabilityforthisharmhastobedetermined—whoistobeheldaccountable?Isthesoftwareprogrammer,theprofilingserviceprovider,ortheprofiledusertobeheldaccountable?Howdoweaccountformarketexternalities?Incorporatecostsatthesource(user/producerofthealgorithm)ormakethesubjectofthealgorithmpay(aswedonow),ormakesocietyatlargecompensatethoseharmed?



1ComptrollerThomasCurry’sremarkstoaconferenceFriday2December2016aswellasanoutlineoftheOCCproposalcanbefoundherehttps://occ.gov/news-issuances/news-releases/2016/nr-occ-2016-152.html.Aletterfrom49consumerandcommunitygroups,expressingconcerns,butpreparedbeforetheannouncement,canbefoundherehttp://ourfinancialsecurity.org/wp-content/uploads/2016/12/OCC-fintech-charter-49-groups-FILED-12-1-2016.pdf.2InDecember2018,acourtruledthatalawsuitagainsttheOCCbroughtbytheNewYorkStateDepartmentofFinancialServiceswasnotyetripebecausetheOCChadnotyetactuallyfiledacharter,norhadanyfirmsappliedforone.Seenewsrelease,“CourtRulesinNewYork-OCCCase”,15Dec2017availableathttps://www.csbs.org/court-rules-new-york-occ-caseInMay2018,adifferentcourtruledagainsttheConferenceofStateBankSupervisorsforsimilarreasons.Seenewsrelease,“StatementbyJohnRyanonFederalCourtDecisioninCSBSvs.OCC”,1May2018,https://www.csbs.org/statement-john-ryan-federal-court-decision-csbs-vs-occ3PYMNTSArticle,“OCCGearingUptoPublishPositionOnFinTechCharter,”10April2018,availableathttps://www.pymnts.com/news/regulation/2018/occ-publish-position-fintech-charter-joseph-otting-banking/4Report,“Enhancinganti-moneylaunderingandfinancialaccess:Cannewtechnologyachieveboth?,”April2018,availableathttps://www.brookings.edu/wp-content/uploads/2018/04/es_20180413_fintech_access.pdf5https://intelligence.businessinsider.com/post/fintech-deals-see-record-numbers-in-q1-2018-pfm-companies-need-to-get-smarter-2018-46Asrecentreportontheroledigitalmarketingplaysinfinancialservicesexplained,“thereisanexplosionofdataflowingthroughdevices,serversandthecloud.Moreisknownaboutusthaneverbefore:ourdemographics,purchasehistory,location,browsingbehavioronline,andinteractionswithwearables,car,houseandrefrigerator.Thisfloodofdataisoverwhelmingformanycompaniestryingtounderstandwhatdatatocollectandhowtoleveragethisdatabacktothecustomerinordertoberelevanttoindividualdemandsforarealtimedigitalexperience.”StefanTornquist,“DigitalTrendsintheFinancialServicesandInsuranceSector,”Econsultancy,May2016,https://econsultancy.com/reports/digital-trends-in-the-financial-services-and-insurance-sector-2016/.7https://policyreview.info/articles/analysis/role-digital-marketing-political-campaigns8https://intelligence.businessinsider.com/post/how-facebooks-data-privacy-woes-could-impact-fintech-2018-59https://www.nytimes.com/2018/03/24/technology/google-facebook-data-privacy.html10JuanBenitez,“BraintreeDrivesCommerceForwardwithFacebookMessengerandUber,”16Dec.2015,https://www.braintreepayments.com/blog/braintree-drives-commerce-forward-with-facebook-messenger-and-uber/;“ChatbotsforInvesting:ResearchandTrading,”DailyFintech,26July2016,https://dailyfintech.com/2016/07/26/chatbots-for-investing-research-and-trading/.11ThiscolumnnotestheArizonalawandconsiderationinIllinois.ProposalsarealsounderreviewinotherstatesincludingDelaware.JasonHenrichs,“Fintechneedsmoreregulatory'sandboxes'”,26April2018,Availableathttps://www.americanbanker.com/opinion/fintech-needs-more-regulatory-sandboxes12TheLeadershipConference,“CivilRightsPrinciplesfortheEraofBigData,”2014,http://www.civilrights.org/press/2014/civil-rights-principles-big-data.html;WorldPrivacyForum,“WPFReport—TheScoringofAmerica:HowSecretConsumerScoresThreatenYourPrivacyandYourFuture,”2Apr.2014,https://www.worldprivacyforum.org/2014/04/wpf-report-the-scoring-of-america-how-secret-consumer-scores-threaten-your-privacy-and-your-future/;MeganSmith,DJPatil,CeciliaMuñoz,“BigRisks,BigOpportunities:theIntersectionofBigDataandCivilRights,”WhiteHouseBlog,4May2016,https://www.whitehouse.gov/blog/2016/05/04/big-risks-big-opportunities-intersection-big-data-and-civil-rights;U.S.PIRGEducationFundandCenterforDigitalDemocracy,“BigDataMeansBigOpportunitiesandBigChallenges:PromotingFinancialInclusionandConsumerProtectioninthe‘BigData’FinancialEra,”27Mar.2014,http://www.uspirg.org/reports/usf/big-data-means-big-opportunities-and-big-challenges;ChiChiWu,“ProceedwithCautiononCreditScoringwithAlternativeData,”AmericanBanker,11June2015,http://www.americanbanker.com/bankthink/proceed-with-caution-on-credit-scoring-with-alternative-data-1074824-1.html.13FederalTradeCommission,“FTCChargesLendingClubwithDeceivingConsumers:Defendantpromises“nohiddenfees”butchargesthemanyway”,25April2018,availableathttps://www.ftc.gov/news-events/press-releases/2018/04/ftc-charges-lending-club-deceiving-consumers-0;ConsumerFinancialProtectionBureau,“BureauofConsumerFinancialProtectionAnnouncesSettlementWithWellsFargoForAuto-LoanAdministrationandMortgagePractices:CoordinatedActionwithOfficeoftheComptrolleroftheCurrencyRequiresBanktoReimburseAffectedBorrowersandPay$1BillionFine”,20April2018,availableathttps://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-announces-settlement-wells-fargo-auto-loan-administration-and-mortgage-practices/;ConsumerFinancialProtectionBureau,“CFPBOrdersLendUptoPay



$3.63MillionforFailingtoDeliverPromisedBenefits,”27Sept.2016,http://www.consumerfinance.gov/about-us/newsroom/lendup-enforcement-action/;AnnamariaAndriotis,“FintechUpstartLendUpFinedbyCFPB,CaliforniaRegulator,”WallStreetJournal,27Sept.2016,http://www.wsj.com/articles/fintech-upstart-lendup-fined-by-cfpb-california-regulator-1474993380;SonaliBasak,“LendingClubCEOExitsAfterInternalReviewofLoanSales,”Bloomberg,9May2016,http://www.bloomberg.com/news/articles/2016-05-09/lendingclub-ceo-resigns-after-internal-review-of-loan-sales.14https://home.kpmg.com/xx/en/home/media/press-releases/2018/02/global-fintech-funding-tops-us-31b-for-2017-fueled-by-us-in-q4-kpmg-pulse-of-fintech-report.html15BIIntelligence,“TheFinTechEcosystemReport,”Nov.2016,personalcopy.Forasummaryofthereport,seeSarahKocianski,“TheFinTechEcosystemReport:TheEmergingTechnologiesandFirmsDrivingChangeinFinancialServicesandHowLegacyPlayersCanNavigatetheDisruption,”BusinessInsider,2Nov.2016,http://www.businessinsider.com/the-fintech-ecosystem-explained-measuring-the-effects-of-technology-on-the-entire-financial-services-industry-2015-12.https://intelligence.businessinsider.com/post/the-fintech-ecosystem-how-incumbents-and-startups-are-finally-working-together-to-define-the-future-of-financial-services-2017-1016BIIntelligence,“TheFinTechEcosystemReport.”17Dietz,etal.,“CuttingThroughtheFinTechNoise:MarkersofSuccess,ImperativesforBanks.”18“SoFi,”FacebookBusiness,https://www.facebook.com/business/success/sofi.19FICO,“CanAlternativeDataExpandCreditAccess?”InsightsWhitePaperNo.90,2015,http://www.fico.com/en/latest-thinking/white-papers/can-alternative-data-expand-credit-access;“LinkingContactCenterandMarketingDataforEnhancedCustomerInsight,”Neustar,https://www.neustar.biz/resources/videos/linking-contact-center-and-marketing-data.20U.S.PIRGEducationFundandCenterforDigitalDemocracy,“BigDataMeansBigOpportunitiesandBigChallenges:PromotingFinancialInclusionandConsumerProtectioninthe‘BigData’FinancialEra.”21PamDixonandBobGellman,“TheScoringofAmerica:HowSecretConsumerScoresThreatenYourPrivacyandYourFuture,”WorldPrivacyForum,2Apr.2014,http://www.worldprivacyforum.org/wp-content/uploads/2014/04/WPF_Scoring_of_America_April2014_fs.pdf.22CathyO’Neil,WeaponsofMathDestruction:HowBigDataIncreasesInequalityandThreatensDemocracy,(NewYork:CrownPublishingGroup,2016).23Report,“PublicScrutinyofAutomatedDecisions:EarlyLessonsandEmergingMethods,”TeamUpturnandOmidyarNetwork,28February2018,availableathttp://omidyar.com/sites/default/files/file_archive/Public%20Scrutiny%20of%20Automated%20Decisions.pdf24DanielNestel,“NewCRAGuidancePromotesUseofAlternativeDatainLending,”FICOBlog,4Oct.2016,http://www.fico.com/en/blogs/risk-compliance/new-cra-guidance-promotes-use-of-alternative-data-in-lending/.25NationalConsumerLawCenter,“FullFileUtilityCreditReporting:HarmstoLow-IncomeConsumers,”June2013,http://www.nclc.org/images/pdf/credit_reports/ib_utility_credit_2013.pdf.26“Profiling(informationscience),”Wikipedia,https://en.wikipedia.org/wiki/Profiling_(information_science).27OscarH.Gandy,ComingtoTermswithChance:EngagingRationalDiscriminationandCumulativeDisadvantage(NewYork:Routledge,2009).28Gandy,ComingtoTermswithChance:EngagingRationalDiscriminationandCumulativeDisadvantage,p.13.29NationalConsumerLawCenter,“PastImperfect:HowCreditScoreandOtherAnalytics‘BakeIn’andPerpetuatePastDiscrimination,”May2016,http://www.nclc.org/images/pdf/credit_discrimination/Past_Imperfect050616.pdf.30Onlyasmallportionofscoringpracticesarecoveredbycurrentlegislation—theFairCreditReportingAct(FCRA)andtheEqualCreditOpportunityAct(ECOA).Totheextentthatsuchmodelingdataareusedto“prescreen”anindividualaspartofthe“firmofferofcredit”process,theFairCreditReportingAct(FCRA)regulatesthesepracticesandprovidesconsumerswithstrictconsumerprotections,includingtheexplicitrighttoopt-outofhavingtheircreditfilesusedforprescreenmarketing.However,marketersclaimthatmuchofthefinancialandotherdatatheyusetomakedecisionsonwhomtotargetfalloutsideoftheFCRArules—sincesuchdataaretiedonlytoadvertisingtopromoteinterestinabrandorproduct,not,purportedly,tosolicitcredit



decisions.U.S.PIRGEducationFundandCenterforDigitalDemocracy,“BigDataMeansBigOpportunitiesandBigChallenges:PromotingFinancialInclusionandConsumerProtectioninthe‘BigData’FinancialEra.”31eMarketer,“TheUSFinancialServicesIndustry2016:DigitalAdSpendingForecastandTrends,”12May2016,https://www.emarketer.com/Report/US-Financial-Services-Industry-2016-Digital-Ad-Spending-Forecast-Trends/2001778;LaurieNaspe,“AGuidetoProgrammaticAdvertisingforFinancialMarketers,”TheFinancialBrand,30Mar.2016,https://thefinancialbrand.com/58128/programmatic-advertising-banking/.32TeamUpturn,“LeadAstray,”October2015,https://www.teamupturn.com/reports/2015/led-astray33Letterof31May2016fromMainStreetAlliance,CaliforniaReinvestmentCoalition,WoodstockInstituteandNationalPeople’sActiontotheOCC,respondingtoOCCpaper““SupportingResponsibleInnovationintheFederalBankingSystem:AnOCCPerspective,(citationsinoriginalomitted).http://www.woodstockinst.org/sites/default/files/attachments/Response%20to%20OCC%20Paper%20re%20Innovation.pdf34MaryWisniewski,“Thedataaccessdebateisabouttogetalotmoreinteresting”,27January2017,TheAmericanBanker,Availableathttps://finance.yahoo.com/news/banking-war-access-data-stifling-innovation-143439973.html35EthanWolfeMann,“Abankingwaroveraccesstoyourdataisstiflinginnovation,”YahooFinance,28September2017,availableathttps://finance.yahoo.com/news/banking-war-access-data-stifling-innovation-143439973.html36Forexample,TheSEChostedaforumtodiscussinnovationinthefinancialservicesindustryon14November2016.U.S.SecuritiesandExchangeCommission,“FinTech:TheEvolvingFinancialMarketplace,”https://www.sec.gov/spotlight/fintech.TheTreasuryDepartmentissuedawhitepaperontheonlinemarketplacelendingindustryinMay2016.U.S.DepartmentoftheTreasury,“OpportunitiesandChallengesinOnlineMarketplaceLending,”10May2016,https://www.treasury.gov/connect/blog/Documents/Opportunities_and_Challenges_in_Online_Marketplace_Lending_white_paper.pdf.SeveralfederalagenciesreleasedfinalrevisionstoInteragencyQuestionsandAnswersRegardingCommunityReinvestment,addressingtheuseofalternativecreditscoresinJuly,2016.Theagenciesconsiderthisuseofalternativecredithistoriesasan“innovativeorflexiblelendingpractice”thatenhancesthe“successandeffectiveness”oftheinstitution’slendingprogram.OfficeoftheComptrolleroftheCurrency,“AgenciesReleaseFinalRevisionstoInteragencyQuestionsandAnswersRegardingCommunityReinvestment,”15July2016,https://www.occ.gov/news-issuances/news-releases/2016/nr-ia-2016-82.html.37RachelWitkowski,“CFPBGivesUpbeatAssessmentofFintechin‘ProjectCatalyst’Report,”WallStreetJournal,24Oct.2016,http://www.wsj.com/articles/cfpb-gives-upbeat-assessment-of-fintech-in-project-catalyst-report-1477354150.38OfficeoftheControlleroftheCurrency,“SupportingResponsibleInnovationintheFederalBankingSystem:AnOCCPerspective,”Mar.2016,https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-responsible-innovation-banking-system-occ-perspective.pdf.39CommentbyCaliforniaReinvestmentCoalition,MainStreetAlliance,NationalPeople’sAction,WoodstockInstitute,May31,2016,,OfficeoftheComptrolleroftheCurrency,https://www.occ.gov/topics/bank-operations/innovation/comment-adams.pdf40OfficeoftheComptrolleroftheCurrency,“RecommendationsandDecisionsforImplementingaResponsibleInnovationFramework,”Oct.2016,https://www.occ.gov/topics/bank-operations/innovation/recommendations-decisions-for-implementing-a-responsible-innovation-framework.pdf.41https://www.occ.treas.gov/topics/responsible-innovation/index-innovation.html42OfficeoftheComptrolleroftheCurrency,“RecmmendationsandDecisionsforImplementingaResponsibleInnovationFramework.”43ValueWalk,“IncomingAdministration,StatePressure,ComplicatesOutlookforFintechCharter,”22Nov.,2016,http://www.valuewalk.com/2016/11/fintech-charter/44ConferenceofStateBankSupervisors“StateRegulatorsOpposeOCCFintechCharter,”14Nov.2016,https://www.csbs.org/news/press-releases/pr2016/Pages/111416.aspx.45CommentbyCaliforniaReinvestmentCoalition,MainStreetAlliance,NationalPeople’sAction,WoodstockInstitute,May31,2016,,OfficeoftheComptrolleroftheCurrency,https://www.occ.gov/topics/bank-operations/innovation/comment-adams.pdf



46WhitePaper,“OCCSummaryofCommentsandExplanatoryStatement:SpecialPurposeNationalBankChartersforFinancialTechnologyCompanies,”OCC,March2017,availableathttps://www.occ.treas.gov/topics/responsible-innovation/summary-explanatory-statement-fintech-charters.pdf47SeeNationalStateBankofElizabeth,NJv.Smith,No.76-1479(D.N.J.Sept.16,1977),rev’dassupersededbystatute591F.2d223(3dCir.1979);cf.IndependentBankersAss’n.ofAm.v.Conover,Fed.BankingL.Rep.(CCH)¶86,178(M.D.Fla.1985).(“Thecaselawtakesforgrantedthatthecoreofthebusinessofbankingasdefinedbylawandcustomisacceptingdemanddepositsandmakingcommercialloans.”)48ConsumerFinancialProtectionBureau,“ProjectCatalystReport:PromotingConsumer-friendlyInnovation,”24Oct.2016,http://www.consumerfinance.gov/data-research/research-reports/project-catalyst-report-promoting-consumer-friendly-innovation/.49ConsumerFinancialProtectionBureau,“RequestforInformationRegardingConsumerAccesstoFinancialRecords,”FederalRegister,22Jan.2016,https://www.federalregister.gov/documents/2016/11/22/2016-28086/requests-for-information-consumer-access-to-financial-records.50RichardCordray,“PreparedRemarksofCFPBDirectorRichardCordrayatMoney20/20,”23Oct.2016,http://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-director-richard-cordray-money-2020/.51TelisDemos,“FintechStartupsWanttoSaveOneKeyPageofDodd-FrankCompaniesargueSection1033preservestheirrighttopulldatafromcustomers’bankaccounts,”2Feb2017,availableathttps://www.wsj.com/articles/fintech-startups-want-to-save-one-key-page-of-dodd-frank-148603500152SeeEthanWolff-Mann,“Abankingwaroveraccesstoyourdataisstiflinginnovation,”YahooNews,28Sept2017andAmandaDixon,“Fintechroadblocks:Whybanksblockbudgetingapps,”BankRateMonitor,5December2017,https://www.bankrate.com/banking/banks-block-fintech-budgeting-apps/53Release,“CFPBAnnouncesFirstNo-ActionLettertoUpstartNetwork:CompanytoRegularlyReportLendingandComplianceInformationtotheBureau,14September2017,availableathttps://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-first-no-action-letter-upstart-network/54“H.Res.835-ExpressingthesenseoftheHouseofRepresentativesthattheUnitedStatesshouldadoptanationalpolicyfortechnologytopromoteconsumers'accesstofinancialtoolsandonlinecommercetopromoteeconomicgrowthandconsumerempowerment”Congress.gov,114thCongress(2015-2016),https://www.congress.gov/bill/114th-congress/house-resolution/835.55LalitaClozel,“FintechRegulationMayFirmUpUnderTrumpPresidency,”AmericanBanker,10Nov.2016,http://www.americanbanker.com/news/law-regulation/fintech-regulation-may-see-boost-under-trump-presidency-1092364-1.html.HR835,theFinTechresolution,waspassedonanoverwhelminglybipartisanvote385to4.Itsupportstheadoptionofa“nationalpolicyfortechnologytopromoteconsumers’accesstofinancialtoolsandonlinecommercetopromoteeconomicgrowthandconsumerempowerment.”Whilewithoutawholelotofsubstance,theFinTechindustrywascheeringinresponse,sincethebillhas“everythingafintechpoliticaljunkiecouldpossiblywant,”astheAmericanBankersummarized.JacksonMueller,“EnoughwithD.C.'sMixedMessagingonFintech,”AmericanBanker,16Sept.2016,http://www.americanbanker.com/bankthink/enough-with-dcs-mixed-messaging-on-fintech-1091375-1.html.56HR4439,the“ModernizingCreditOpportunitiesAct,”(Hollingsworth),availableathttps://www.congress.gov/bill/115th-congress/house-bill/443957FederalDepositInsuranceCorporation,“ExaminationGuidanceforThird-PartyLending,”29July2016,https://www.fdic.gov/news/news/financial/2016/fil16050a.pdf.58Amongthethird-partylendingarrangementsidentifiedintheguidancearethosewherethenonbankoriginatorlacksthenecessarylicensestolendonitsownbehalfandseekstotakeadvantageoftheinstitution’sabilitytoexportinterestrates.Byidentifyingthesearrangementswithoutcriticizingthem—andbysettinguptheframeworktomanagetherisksofthesearrangements—theThird-PartyGuidancecouldlegitimizeandleadtothespreadofrent-a-bankarrangementsthatenablehigh-cost,predatorypaydayorinstallmentloans,aswellasotherformsofhigh-ratelending.59https://www.fdic.gov/bank/analytical/cfr/bank-research-conference/annual-17th/17th-agenda.html60AnnaIrrera,“SoFiwithdrawsU.S.bankingapplication,citingleadershipchange,”Reuters,13October2017,availableathttps://www.reuters.com/article/us-sofi-future/sofi-withdraws-u-s-banking-application-citing-leadership-change-idUSKBN1CI2XC61Release,FDICAnnouncesSettlementwithCrossRiverBank,Teaneck,NewJersey,andFreedomFinancialAssetManagement,LLC,SanMateo,California,forUnfairandDeceptivePractices:Settlementawardsrestitutiontoharmedconsumersandrequiresthe



banktoprovideincreasedoversightofthird-partyproviders,”FDIC,28March2018,availableathttps://www.fdic.gov/news/news/press/2018/pr18021.html62https://www.prnewswire.com/news-releases/cross-river-selected-as-two-time-winner-in-second-annual-lendit-fintech-industry-awards-300630762.html63“RemarksbyMartinJ.Gruenberg,Chairman,FDICattheForumontheUseofTechnologyintheBusinessofBanking;Arlington,VA,”7May2018,availableathttps://www.fdic.gov/news/news/speeches/spmay0718.html64Newsrelease,“FTCChargesLendingClubwithDeceivingConsumers:Defendantpromises“nohiddenfees”butchargesthemanyway”,FederalTradeCommission,25April2018,availableathttps://www.ftc.gov/news-events/press-releases/2018/04/ftc-charges-lending-club-deceiving-consumers-0;65Release,“FTCtoHostCryptocurrencyWorkshoponJune25,”FTC,30April2018,availableathttps://www.ftc.gov/news-events/press-releases/2018/04/ftc-host-cryptocurrency-workshop-june-2566https://www.ftc.gov/news-events/media-resources/consumer-finance/financial-technology67FederalTradeCommission“FinancialTechnology:ProtectingConsumersontheCuttingEdgeofFinancialTransactions,”https://www.ftc.gov/news-events/media-resources/consumer-finance/financial-technology.68Release,“FTCtoHostCryptocurrencyWorkshoponJune25”,FTC,30April2018,Availableathttps://www.ftc.gov/news-events/press-releases/2018/04/ftc-host-cryptocurrency-workshop-june-2569TheFTCreportexplainedthat:Bigdatamay

o Resultinmoreindividualsmistakenlybeingdeniedopportunitiesbasedontheactionsofothers.o Createorreinforceexistingdisparities.o Exposesensitiveinformation.o Assistinthetargetingofvulnerableconsumersforfraudo Createnewjustificationsforexclusion.o Resultinhigher-pricedgoodsandservicesforlowerincomecommunities.o Weakentheeffectivenessofconsumerchoice.

FederalTradeCommission,“BigData:AToolforInclusionorExclusion?UnderstandingtheIssues,”Jan.2016,https://www.ftc.gov/reports/big-data-tool-inclusion-or-exclusion-understanding-issues-ftc-report.Otherthanemphasizingtheimportanceofadheringtoexistinglaws,particularlytheFCRA,ECOandtheFTCAct,thereportwasthinonconcreteguidancetoaddresstherisksofusesofBig-Dataanalytics.70U.S.SecuritiesandExchangeCommission,“FinTech:TheEvolvingFinancialMarketplace.”71https://www.sec.gov/spotlight/fintech72https://www.sec.gov/investment/im-guidance-2017-02.pdf73https://www.sec.gov/rules/final/2015/33-9974.pdf74DanCruz,“OpportunitiesandChallengesinOnlineMarketplaceLending,”TreasuryNotes,10May2016,https://www.treasury.gov/connect/blog/Pages/Opportunities-and-Challenges-in-Online-Marketplace-Lending.aspx.75https://www.fintechlawblog.com/2018/03/u-s-treasury-official-previews-report-on-fintech-regulation/76http://onlinelendersalliance.org/ola-provides-comments-to-treasury-department-in-advance-of-fintech-report/77Paper,“FinTech:PromotingResponsibleInnovation,”AmericanBankersAssociation,May2018,availableathttps://www.aba.com/Advocacy/Documents/fintech-treasury-report.pdf78InDecember2018,acourtruledthatalawsuitagainsttheOCCbroughtbytheNewYorkStateDepartmentofFinancialServiceswasnotyetripebecausetheOCChadnotyetactuallyfiledacharter,norhadanyfirmsappliedforone.Seenewsrelease,“CourtRulesinNewYork-OCCCase”,15Dec2017availableathttps://www.csbs.org/court-rules-new-york-occ-caseInMay2018,adifferentcourtruledagainsttheConferenceofStateBankSupervisorsforsimilarreasons.Seenewsrelease,“StatementbyJohnRyanonFederalCourtDecisioninCSBSvs.OCC”,1May2018,https://www.csbs.org/statement-john-ryan-federal-court-decision-csbs-vs-occ79https://www.csbs.org/vision202080DivonneSmoyerandEvanThorn,“StateAGsDoubleDownFocusonFinancialServices,includingFinTech”ReedSmithFinTechUpdate,6Oct.2016,https://www.fintechupdate.com/2016/10/state-ags-double-down-focus-on-financial-services-including-fintech/.81Release,“ArizonaBecomesFirstStateinU.S.toOfferFintechRegulatorySandbox,”OfficeoftheAttorneyGeneral,22March2018,availableathttps://www.azag.gov/press-release/arizona-becomes-first-state-us-offer-fintech-regulatory-sandbox8282https://en.wikipedia.org/wiki/Financial_technology



83https://en.wikipedia.org/wiki/Financial_technology84SmartDataIsattheCoreofFinTechInnovation,Let’sTalkPayments,8-16-16,https://letstalkpayments.com/smart-data-is-at-the-core-of-fintech-innovation/85https://letstalkpayments.com/doubts-about-the-business-models-of-fintech-startups-are-growing/)86ConsumerFinancialProtectionBureau,“ProjectCatalystReport:PromotingConsumer-friendlyInnovation,”24Oct.2016,http://www.consumerfinance.gov/data-research/research-reports/project-catalyst-report-promoting-consumer-friendly-innovation/.87ConsumerFinancialProtectionBureau,“ProjectCatalystReport:PromotingConsumer-friendlyInnovation,”Oct.2016,p.9,https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/102016_cfpb_Project_Catalyst_Report.pdf.88See,forexample,ConsumerFinancialProtectionBureau,“CFPBTakesActionAgainstOnlineLenderforDeceivingBorrowers,”18Nov.2015,http://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-online-lender-for-deceiving-borrowers/.

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