Margaret Liu, deputy general counsel for the Conference of State Bank Supervisors.
Margaret Liu, deputy general counsel for the Conference of State Bank Supervisors. (Courtesy photo)

The Conference of State Bank Supervisors recently formalized its plans to modernize state banking regulations in the next three years. Margaret Liu, deputy general counsel for the association, said the plans are well underway to transform the landscape for nonbanks, including financial technology companies.

The state banking regulators’ way forward for nonbanks, Vision 2020, outlines six ways in which the CSBS seeks to provide “a regulatory system that makes supervision more efficient and recognizes standards across state lines” by 2020, according to a press release.

The new plan, announced by the CSBS May 10, includes: redesigning the Nationwide Multistate Licensing System (NMLS), harmonizing multistate supervision, forming a fintech industry advisory panel, assisting state banking departments and making it easier for banks to provide services to nonbanks as well as making supervision more efficient for third parties, according to the association.

Among the most significant of the efforts will be a redesign of the NMLS, which is the common platform for state nonbank regulation. In the association’s announcement last week, it described how the system will use data and analytics to offer a more automated licensing process for new applicants, including fintechs. Vision 2020 is also intended to streamline multistate regulation, as one of the biggest complaints from fintechs is that they must currently grapple with regulatory requirements state-by-state.

Some observers have viewed the CSBS’ Vision 2020 as a direct response and potential rival to the Office of the Comptroller of the Currency’s proposed special purpose bank charter, which was introduced in draft form March 15. The OCC charter would allow fintechs to apply to operate as nationally chartered banks.

Vincent Basulto, a partner at Richards Kibbe & Orbe in New York, said earlier this week that Vision 2020 appears to be “part of a multipronged strategy aimed at undermining the OCC fintech charter proposal.”

Liu denies the initiative is a result of the OCC’s fintech charter. The CSBS said the timing of the announcement is coincidental.

In an emailed statement Tuesday, an OCC spokesman said of Vision 2020: “We share the goal of providing greater choice, improving supervision and supporting responsible innovation that allows the banking system to better serve consumers, businesses and communities across the country.”

The announcement of Vision 2020 came about two weeks after the association filed suit against the OCC for allegedly overstepping its authority in offering fintechs a means to become national banks. Liu declined to comment on the pending lawsuit.

As far as state banking regulation, Liu said there have been a lot of coordinated efforts among the CSBS and the states to streamline the licensing process for fintech companies that operate nationally or in multiple states.

Liu spoke to ALM about the goals of Vision 2020. The conversation has been edited for length and clarity.

ALM: The timing of the CSBS’ announcement about Vision 2020 comes not long after the OCC proposed a fintech charter. The CSBS, obviously, based on claims in its lawsuit, does not approve of the OCC overseeing nonbanks. Is Vision 2020 in response to the proposed charter or is it being presented as an alternative?

Margaret Liu: This is about what state regulators do today, what they’ve done for decades and what they will continue to do.

ALM: What’s pushing Vision 2020?

ML: The idea is making sure that state supervision and licensing in the nonbank area is as efficient as possible, while protecting consumers in the marketplace.

ALM: What is the overhaul of the NMLS going to look like?

ML: This is a multiyear effort. The states made the decision in 2006 to create the NMLS. There have been a lot of enhancements since we began operating in 2008. You have to refresh the whole thing at a certain point. It’s a large system, so you don’t undertake this lightly. We want to turn the NMLS into a more powerful tool for greater efficiency, for better harmony and to make it easier for entities to be licensed while still fully recognizing the laws of our members.

ALM: What did previous enhancements entail and how will the latest efforts be different?

ML: Over the years, we have added significant functionality, including a unified call report for the mortgage industry and the money service business industry, a fully electronic surety bond process that complies with each state’s requirements, a single credit reporting and criminal background check process regardless of the number of states a person is licensed in.

The rebuild that is underway now is much more significant and transformative. We are building on the long history of state licensing experience and the depth of data that is in NMLS to change state licensing from an information deficient process to a data informed, risk-based analysis. Automation of routine tasks will speed processing for both licensees and regulators. This is the heart of regtech — applying data and automation to improve supervision while lessening compliance burdens.

ALM: What else will change with the NMLS in the next three years?

ML: It already has a complete repository for the mortgage industry and it’s well on its way to be a complete repository of money transmitters. We are aiming for similar adoption among other important industries such as payday and small dollar lending, vehicle finance, debt collection, student loan lending and servicing, and check cashing. Nearly all the large companies in these industries are already using NMLS.

ALM: How closely is the CSBS working with the states in its overhaul of the NMLS?

ML: There are also things going on in the states individually. The New York Department of Financial Services is expanding its use of NMLS and Superintendent Maria Vullo’s statement tied it to Vision 2020. But it’s something individual states are owning.

ALM: How soon will the CSBS have its fintech industry advisory panel in place?

ML: We hope to have more out there on the industry advisory panel within the next several weeks. Our goals with this panel are to expand and deepen industry engagement and elicit actionable industry feedback about aspects of the state licensing system that are the biggest pain points for fintech companies.

Copyright National Law Journal. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

The Conference of State Bank Supervisors recently formalized its plans to modernize state banking regulations in the next three years. Margaret Liu, deputy general counsel for the association, said the plans are well underway to transform the landscape for nonbanks, including financial technology companies.

The state banking regulators’ way forward for nonbanks, Vision 2020, outlines six ways in which the CSBS seeks to provide “a regulatory system that makes supervision more efficient and recognizes standards across state lines” by 2020, according to a press release.

The new plan, announced by the CSBS May 10, includes: redesigning the Nationwide Multistate Licensing System (NMLS), harmonizing multistate supervision, forming a fintech industry advisory panel, assisting state banking departments and making it easier for banks to provide services to nonbanks as well as making supervision more efficient for third parties, according to the association.

Among the most significant of the efforts will be a redesign of the NMLS, which is the common platform for state nonbank regulation. In the association’s announcement last week, it described how the system will use data and analytics to offer a more automated licensing process for new applicants, including fintechs. Vision 2020 is also intended to streamline multistate regulation, as one of the biggest complaints from fintechs is that they must currently grapple with regulatory requirements state-by-state.

Some observers have viewed the CSBS’ Vision 2020 as a direct response and potential rival to the Office of the Comptroller of the Currency’s proposed special purpose bank charter, which was introduced in draft form March 15. The OCC charter would allow fintechs to apply to operate as nationally chartered banks.

Vincent Basulto, a partner at Richards Kibbe & Orbe in New York , said earlier this week that Vision 2020 appears to be “part of a multipronged strategy aimed at undermining the OCC fintech charter proposal.”

Liu denies the initiative is a result of the OCC’s fintech charter. The CSBS said the timing of the announcement is coincidental.

In an emailed statement Tuesday, an OCC spokesman said of Vision 2020: “We share the goal of providing greater choice, improving supervision and supporting responsible innovation that allows the banking system to better serve consumers, businesses and communities across the country.”

The announcement of Vision 2020 came about two weeks after the association filed suit against the OCC for allegedly overstepping its authority in offering fintechs a means to become national banks. Liu declined to comment on the pending lawsuit.

As far as state banking regulation, Liu said there have been a lot of coordinated efforts among the CSBS and the states to streamline the licensing process for fintech companies that operate nationally or in multiple states.

Liu spoke to ALM about the goals of Vision 2020. The conversation has been edited for length and clarity.

ALM: The timing of the CSBS’ announcement about Vision 2020 comes not long after the OCC proposed a fintech charter. The CSBS, obviously, based on claims in its lawsuit, does not approve of the OCC overseeing nonbanks. Is Vision 2020 in response to the proposed charter or is it being presented as an alternative?

Margaret Liu: This is about what state regulators do today, what they’ve done for decades and what they will continue to do.

ALM: What’s pushing Vision 2020?

ML: The idea is making sure that state supervision and licensing in the nonbank area is as efficient as possible, while protecting consumers in the marketplace.

ALM: What is the overhaul of the NMLS going to look like?

ML: This is a multiyear effort. The states made the decision in 2006 to create the NMLS. There have been a lot of enhancements since we began operating in 2008. You have to refresh the whole thing at a certain point. It’s a large system, so you don’t undertake this lightly. We want to turn the NMLS into a more powerful tool for greater efficiency, for better harmony and to make it easier for entities to be licensed while still fully recognizing the laws of our members.

ALM: What did previous enhancements entail and how will the latest efforts be different?

ML: Over the years, we have added significant functionality, including a unified call report for the mortgage industry and the money service business industry, a fully electronic surety bond process that complies with each state’s requirements, a single credit reporting and criminal background check process regardless of the number of states a person is licensed in.

The rebuild that is underway now is much more significant and transformative. We are building on the long history of state licensing experience and the depth of data that is in NMLS to change state licensing from an information deficient process to a data informed, risk-based analysis. Automation of routine tasks will speed processing for both licensees and regulators. This is the heart of regtech — applying data and automation to improve supervision while lessening compliance burdens.

ALM: What else will change with the NMLS in the next three years?

ML: It already has a complete repository for the mortgage industry and it’s well on its way to be a complete repository of money transmitters. We are aiming for similar adoption among other important industries such as payday and small dollar lending, vehicle finance, debt collection, student loan lending and servicing, and check cashing. Nearly all the large companies in these industries are already using NMLS.

ALM: How closely is the CSBS working with the states in its overhaul of the NMLS?

ML: There are also things going on in the states individually. The New York Department of Financial Services is expanding its use of NMLS and Superintendent Maria Vullo’s statement tied it to Vision 2020. But it’s something individual states are owning.

ALM: How soon will the CSBS have its fintech industry advisory panel in place?

ML: We hope to have more out there on the industry advisory panel within the next several weeks. Our goals with this panel are to expand and deepen industry engagement and elicit actionable industry feedback about aspects of the state licensing system that are the biggest pain points for fintech companies.

Copyright National Law Journal. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.