On February 14, 2019, the Conference of State Bank Supervisors (“CSBS”), the national organization of state bank regulators, released the recommendations of its 33-member "Vision 2020 Fintech Industry Advisory Panel".
CSBS agreed to implement 14 of the recommendations from the payments and lending industry sectors. However, only two of the seven specific recommendations from the lending industry sector were adopted, with the remaining recommendations being deferred for future action or implementation. CSBS provided a matrix of its responses to the recommendations and next steps. A link to the matrix is available here.
The adopted payment and lending industry recommendations primarily focus on harmonizing and standardizing state licensing, examination, supervision and financial reporting requirements among CSBS members. They include:
- Developing a 50-state model money services businesses law
- Creating a standardized consumer finance call report
- Building an online database of state licensing and Fintech guidance
- Developing a new state examination system to simplify examinations of non-banks operating on a multi-state basis
- Expanding the use of the Nationwide Multistate Licensing System across all license types to include all state regulators and all non-bank industries supervised at the state level
The items that CSBS deferred for future consideration present thornier issues that are potentially beyond the authority of the state bank supervisors. They center on the lack of consistency in statutory definitions and requirements and the manner in which they are interpreted by each state. The lending industry recommendations being deferred for future CSBS action or implementation include:
- Developing a list of state licensing requirements for modernization and consistency, including eliminating physical office requirements and providing for online delivery of notices and disclosures
- Examining interpretive differences among similar state consumer finance statutes
- Creating a standardized definition of “commercial loan” based upon the use of the loan proceeds
- Treating loans to sole proprietors as consumer or commercial loans based solely upon the use of the proceeds rather than the entity type of the borrower
- Developing consistent approaches to small business financing disclosure requirements that promote clear and transparent protections for small business borrowers
The CSBS Vision 2020 Fintech Industry Advisory Panel recommendations are extensive and will be challenging to execute. The level of cooperation required and resources needed to accomplish the adopted recommendations are significant and may tax the collective resources of CSBS and its members. The deferred recommendations also may require the involvement of state legislatures and state attorneys general, which may affect the timeliness and substance of any outcome.