With bank regulators closing the Volcker rule changes chapter, the president of Federal Deposit Insurance Corp. Jelena McWilliams turns her attention to fintech and low-value lending, which she believes could help underbanked and unbanked consumers gain access to the banking system.
Banking regulators this week finalized certain changes to the Volcker rule that allow banks to invest in venture capital funds and removed the interaffiliate margin requirement for swap exchanges. In an interview with Morning Consult on Friday, McWilliams said that, at least for now, the agency does not plan to make further changes to the Volcker rule and other regulations created in response to the financial crisis. .
“I think we are in a good position. We have to let this happen, ”she said.
Now, with Brian Brooks, the new acting head of the Office of the Comptroller of the Currency, promising to answer some of the big questions in the FinTech industry, McWilliams also plans to tackle those issues.
On a key fintech issue – the “real lender” doctrine – McWilliams said the FDIC plans to develop a rule that would be designed to help clarify when a bank is the “real lender” on a fintech loan and when. a bank is acting as a false front to allow a financial technology company to avoid state interest rate limits on online lenders.
Brooks, in a June 11 webinar at the Online Lending Policy Institute, also said the OCC will soon be proposing a rule on the “real lender” doctrine.
In addition to fintech, McWilliams also said she was “not done” with the problems of lending small dollars to banks.
At the onset of the coronavirus pandemic, the OCC, Federal Reserve, FDIC, and other regulators issued guidelines allowing banks to provide low-value loans, a reversal from 2013 FDIC guidelines and of the OCC who had discouraged the practice. Today payday lenders often serve the needs of low-income consumers who have little or no credit at a bank, but advocacy groups say payday lenders can trap consumers in a cycle of high interest debt.
McWilliams said more could be done to encourage banks to enter the small dollar market, which she said could help consumers avoid exiting the banking system to get a loan.
Banks still aren’t able to make a lot of money with small loans, McWilliams said, and regulators could still do more to make it less risky for banks to offer these loans. She declined to give specific steps regulators could take.
McWilliams said small loans could be used to attract new customers, which usually cost banks a lot of money to withdraw them from other banks.
“How do you get consumers, especially those who have left the banking system, to understand the value proposition of being part of it?” Said McWilliams.