GAO Looks at Fintech

In a report issued Sept. 13, the Government Accountability Office focused its attention on financial technology. The GAO defined four key sectors: marketplace lenders, mobile payments, digital wealth management platforms, and distributed ledger technology. The GAO then described the varied approaches to regulating these sectors, both at the federal and state levels.

As for state regulation, the GAO noted: “State licensing laws and oversight mechanisms, including consumer protection, vary by state…Officials from the Conference of State Bank Supervisors we spoke with noted that the states are working on developing tools that can facilitate compliance with state-by-state licensing mechanisms, such as the
Nationwide Mortgage Licensing and Registry System (NMLS). NMLS is intended to enable firms to complete one record to apply for state licensing that fulfills the requirements of each state, for states that participate in the system.”

Indeed, last week CSBS announced that it had begun development on a next generation NMLS, which will allow state regulators to streamline the multi-state licensing process, integrate data into a new examination technology platform, and enhance a consumer information portal. The next generation NMLS is a core part of CSBS’ Vision 2020, in which state regulators are moving towards a more integrated licensing and supervisory system for fintechs and other non-banks.

Also of note: “Some marketplace lenders that originate loans directly to consumers or businesses (e.g., a direct marketplace lender) are generally required to obtain licenses and register in each state in which they provide lending services. According to officials from CSBS, state regulators then have the ability to supervise these lenders, ensuring that the lender is complying with state and federal lending laws.”

The whole report is worth a read.