June 26, 2020 at 5:39 pm ET
With bank regulators closing the chapter on Volcker rule modifications, Federal Deposit Insurance coverage Corp. Chairman Jelena McWilliams is popping her consideration to monetary know-how and small-dollar lending, which she stated may assist underbanked and unbanked customers entry the banking system.
Banking regulators this week finalized some modifications to the Volcker rule that enable banks to put money into enterprise capital funds and eliminated the interaffiliate margin requirement for swap trades. In an interview with Morning Seek the advice of on Friday, McWilliams stated that, not less than in the intervening time, the company has no plans to make additional modifications to the Volcker rule and different rules created as a response to the monetary disaster.
“I think we’re in a good place. We need to let this play out,” she stated.
Now, with Brian Brooks, the brand new performing head of the Workplace of the Comptroller of the Foreign money, promising to handle a number of the large questions within the fintech business, McWilliams can be contemplating taking on these points.
On one key fintech challenge — the “true lender” doctrine — McWilliams stated the FDIC plans to craft a rule that will be designed to assist make clear when a bank is the “true lender” on a fintech loan and when a bank is performing as a false entrance to permit a fintech firm keep away from a state’s rate of interest limits on on-line lenders.
Brooks, in a June 11 webinar on the On-line Lending Coverage Institute, additionally stated that the OCC will quickly suggest a rule on the “true lender” doctrine.
Along with fintech, McWilliams additionally stated that she’s “not done” with points regarding small-dollar lending at banks.
At the beginning of the coronavirus pandemic, the OCC, Federal Reserve, FDIC and different regulators launched steerage permitting banks to supply small-dollar loans, a reversal from 2013 steerage from the FDIC and OCC that had discouraged the observe. At the moment, payday lenders typically serve the wants of low-income customers who’ve little or no credit score at a bank, however advocacy teams say payday lenders can entice customers in a cycle of high-interest debt.
McWilliams stated extra could be executed to encourage banks to enter the small-dollar market, which she stated may assist customers keep away from going outdoors the banking system to get a loan.
Banks nonetheless don’t stand to make some huge cash from small-dollar loans, McWilliams stated, and regulators may nonetheless do extra to make it much less dangerous for banks to supply these loans. She declined to offer particular steps regulators may take.
McWilliams stated small-dollar loans may very well be used to draw new clients, who often price banks a big sum of money to attract them from different banks.
“How do we get consumers, especially the ones who dropped out of the banking system, to understand the value proposition of being in it?” McWilliams stated.
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