Trump Administration Embraces Fintech Startups

The Trump administration embraced an emerging corner of the financial sector on Tuesday, telling companies that offer new ways to bank and invest that the federal government wants to help them grow.

The Treasury Department in a report recommended that regulators adopt changes it said would better support such financial companies. It recommended a “sandbox” giving regulatory financial relief to startups; encouraged the federal consumer regulator to rescind its payday-lending rule; pushed for a fresh look at rules governing fintech investments by banks; and endorsed an effort by nonbank lenders like LendingClub Corp.  to ease the resale of loans.

The regulator of federally chartered banks also said it would start accepting applications from fintech firms “effective immediately,” opening the door for those firms to receive charters that allow them to operate without acquiring licenses in every state.

Many of the Treasury’s roughly 80 recommendations require additional action from regulators or Congress to bring to reality.

Others face hurdles. Any application for a fintech bank charter is likely to face a lawsuit from state regulators, for instance.

Industry reaction to the report was broadly positive from banks, payment companies, online lenders and others.

Brian Knight, a senior research fellow at George Mason University who has argued current U.S. rules for fintechs are inefficient, said the regulatory regime described in the report toed a middle ground. “It increases competitiveness of fintechs, to the extent they are disadvantaged under the current environment, but in other areas [it] will help banks,” he said.

Some recommendations, including the payday lending section, drew criticism from consumer advocacy groups.

Aaron Klein, a former Obama Treasury official at the Brookings Institution think tank, said that part of the report amounted to a “decision to politicize a document that could have been broadly embraced.”

The Treasury report is the last in a four-part series setting out the Trump administration’s financial regulatory agenda, following reports on banks and credit unions, capital markets, and asset management and insurance.

Senior Treasury officials said that after meeting with industry groups, regulators, advocacy groups and other experts, they concluded the U.S. needs a simpler rulebook for financial startups.

Photo: Andrew/Caballero-Reynolds/Agence France-Presse/Getty Images