The proposal would allow companies to test products and services for consumers in coordination with regulators that oversee the financial services industry.
02/28/2024 8:55 A.M.
2 minute read
A federal bill that would allow companies in the financial services industry to test new products and services with support from regulators was reintroduced on Capitol Hill this week by the chair of the House Financial Services Committee, U.S. Rep. Patrick McHenry, R-N.C.
The Financial Services Innovation Act will be reviewed in a House Financial Services Committee markup hearing at 10 a.m. EST on Feb. 29.
This bill allows companies that want to offer a financial innovation product to petition regulatory agencies, such as the Consumer Financial Protection Bureau, to participate in a “regulatory sandbox” agreement that would provide a safe harbor from enforcement.
The bill also establishes Financial Services Innovation Offices at those regulatory agencies to assist petitioners.
“Technology has radically changed how consumers interact with the financial system, as well as how financial institutions interact with regulators,” McHenry said in a news release. “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road. That’s why I’m reintroducing the Financial Services Innovation Act. This commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market. Innovators have long flocked to American markets because we strike the right balance between fostering innovation and consumer protection—this bill will help ensure the United States continues to lead the world in financial innovation.”
Once the Financial Services Innovation Offices are established, the legislation would allow “companies to apply for an ‘enforceable compliance agreement’ with the respective [offices] that, if accepted, will allow them to provide an innovative product or service under an alternative compliance plan,” according to the news release.
There would also be a liaison committee for the offices tasked with coordinating the cooperation of each office to ensure that regulatory agencies “share information and data on petitions and consult with state regulatory entities to provide information and advice to the public with respect to financial innovations and agency regulation.”
ACA International has supported legislation like McHenry’s proposal because it would allow for critical innovation in the financial services marketplace in coordination with regulators.
The House Financial Services Committee will also discuss a proposed bill from U.S. Reps. Erin Houchin, R-Ind., and Bill Foster, D-Ill., “Fostering the Use of Technology to Uphold Regulatory Effectiveness in Supervision Act,” that would require regulatory agencies requires to assess how their existing technological systems may prevent an agency from conducting real-time assessments of the entities they supervise. Each assessment will address the agency’s technology, procurement practices, workforce, information intake and analysis, and future technological plans.
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