Passing Financial Choice Act Will Help FinTech Innovators
Earlier this month, the U.S. House of Representatives passed the Financial CHOICE Act along partisan lines with all Democrats present voting against it and all but one Republican voting for it.
The CHOICE Act, as my Competitive Enterprise Institute colleague Iain Murray and I have written previously, repeals or eases burdensome financial regulation harming consumers, investors, and entrepreneurs. Some of what it does, like reining in and changing the structure of the Consumer Financial Protection Bureau (CFPB), represents a strong point of disagreement between the parties.
But as I related in a recent interview with Kimberley Adams of “Marketplace.org,” the bill also has many provisions that have garnered bipartisan support.
These provisions include efforts to build on the Jumpstart Our Business Startups (JOBS) Act, which President Obama signed in 2012 to aid startups and lower barriers to investment crowdfunding. The CHOICE Act also helps clear up regulatory uncertainty about peer-to-peer lending.
As Karen Kerrigan, president of the Small Business and Entrepreneurship Council, points out in a letter to the U.S. House urging passage of the bill, “The Financial CHOICE Act includes almost two dozen capital formation bills, many of which have passed the House with large bipartisan votes or by voice vote. These bills zero in on sound reforms that specifically help startups and small businesses access the capital they need to launch, scale, and compete.”
The bill also clears barriers in the financial technology sector that is becoming known as FinTech so its innovations can better reach small entrepreneurs and consumers. In my letter to a subcommittee hearing on FinTech by the House Energy and Commerce Committee (that was inserted into the Congressional Record), I point out, “The FinTech, or financial technology, boom, has much in common with the ascent of ‘sharing economy’ platforms like Uber and Airbnb. Just as these services have vastly improved consumers’ transportation and lodging options, Fintech products can offer more choice and convenience and lower costs to consumers.”
Pointing out that “peer-to-peer” and “marketplace” lending have expanded credit options for consumers and small businesses,” I also noted that there was new uncertainty for providers of this type of lending due to the court case Madden vs. Midland Funding.
In that case, the Second Circuit Court of Appeals reversed a century of “valid when made” precedent by letting a state apply its interest rate cap to a loan made in another state that was bought by a third party. But, as I relayed to the subcommittee, “the CHOICE Act restores the ‘valid when made’ doctrine by stating that a loan’s interest rate stays valid regardless of whether the loan is subsequently sold or transferred.”
The U.S. Senate should get to work on passing portions of the CHOICE Act, particularly regarding the sharing economy and FinTech. It should also shelve legislation that would harm those sectors.
One example of the latter is a deeply flawed bill from Sens. Charles Grassley, R-Iowa, and Diane Feinstein, D-Calif., that would shove any “issuer, redeemer or cashier” of a “digital currency” into the same anti-money laundering regulations as those that govern the big banks. This bill is called the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017.
There are already many privacy concerns with money laundering rules that effectively force banks to spy on their customers. Congress should fix these problems before weighing down FinTech with the same red tape.
Originally posted to Newsmax.