GAO Report Highlights the Need of Improved Regulator Collaboration on Fintech

The Government Accountability Office (GAO) in a recent report noted that improved collaboration among regulators could lead to better consumer protection and regulatory oversight in the Fintech space.

The report noted that Fintech firms are currently subject to an uneven regulatory framework, with a patchwork of state and federal agencies overseeing certain fintech providers, while others remain largely outside the regulatory scope.

The GAO found that the National Credit Union Administration (NCUA) was not included in the Federal Reserve's Interagency Fintech Discussion Forum or the Treasury Department's Interagency Working Group on Marketplace Lending. The report stated that the "lack of NCUA participation in the Interagency Fintech Discussion Forum may preclude NCUA and the other participating agencies from sharing information that could be useful in efforts to oversee the risks that fintech poses to their regulated institutions."

In addition, NCUA commented that, unlike other federal banking regulators, it does not have the authority to examine third-party vendors. In order to examine any services provided by Fintech players to credit unions, NCUA must rely on credit unions to voluntarily provide information on the third-party service provider. The agency noted that this potentially creates challenges in evaluating the activities of Fintech players.

The agency wrote that it will monitor the risk posed by Fintech firms by working with the other banking regulators.

The report made 16 recommendations. Those recommendations specific to NCUA include:

• The Chair of the Board of Governors of the Federal Reserve System should invite NCUA to participate in the Interagency Fintech Discussion Forum.
• The Chairman of the NCUA should engage in collaborative discussions with other relevant financial regulators in a group that includes all relevant stakeholders and has defined agency roles and outcomes to address issues related to consumers’ use of account aggregation services.
• The Chairman of the NCUA should formally evaluate the feasibility and benefit of establishing an office of innovation or clear contact point, including at least a website with a dedicated email address.
• The Chairman of the NCUA should formally evaluate the feasibility and benefits to their regulatory capacities of adopting certain knowledge-building initiatives related to financial innovation.

Read the report.