Congress Expresses Concerns Over the Federal Deposit Insurance Corporation(FDIC’s) Approach to Fintech Innovation

Three Republican members of the House Financial Services Committee, including Patrick McHenry, Andy Barr, and French Hill, voiced concern in a letter to FDIC Chair Martin Gruenberg on February 2, 2024, according to an article by law firm Ballard Spahr.

The congressmen criticized the FDIC’s perceived reduction in engagement with industry participants regarding financial technology (fintech) and innovation. Specifically, they highlighted the dismantling of the external-facing portion of the FDIC’s FDITech Office, which they believe has shifted focus solely to the adoption of technologies within the FDIC.

They also expressed worries about the lack of transparency regarding how the FDIC’s approach to innovation will impact examinations and compliance procedures and fear that the FDIC’s actions may impede the development of innovative products and services beneficial to consumers and businesses.

To gain insight into the FDIC’s strategy and actions toward financial institutions and fintechs, the congressmen requested detailed information on various topics, including the number of institutions issued consent orders related to third-party relationships with fintech companies, enforcement changes since 2020, and appeals review processes.

Furthermore, the letter sought clarification on how the FDIC engages with industry participants in the absence of a dedicated innovation office, including details on the nature, frequency, and participants of such engagements.

Given the FDIC’s increased scrutiny of bank-fintech partnerships, the letter’s requests hold significance as regulatory actions can impact innovation in the sector. Clear guidelines and transparency are crucial to avoid stifling innovation. The requested information could offer clarity on regulatory expectations, aiding both regulators and industry stakeholders. The congressmen set a deadline of February 29, 2024, for the FDIC to respond to their inquiries.