[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING OPPORTUNITIES FOR
FINANCIAL MARKETS IN THE DIGITAL ERA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND CONSUMER CREDIT
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 28, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-121
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
U.S. GOVERNMENT PUBLISHING OFFICE
32-372 PDF WASHINGTON : 2018
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannon McGahn, Staff Director
Subcommittee on Financial Institutions and Consumer Credit
BLAINE LUETKEMEYER, Missouri, Chairman
KEITH J. ROTHFUS, Pennsylvania, WM. LACY CLAY, Missouri, Ranking
Vice Chairman Member
EDWARD R. ROYCE, California CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
BILL POSEY, Florida DAVID SCOTT, Georgia
DENNIS A. ROSS, Florida NYDIA M. VELAZQUEZ, New York
ROBERT PITTENGER, North Carolina AL GREEN, Texas
ANDY BARR, Kentucky KEITH ELLISON, Minnesota
SCOTT TIPTON, Colorado MICHAEL E. CAPUANO, Massachusetts
ROGER WILLIAMS, Texas DENNY HECK, Washington
MIA LOVE, Utah GWEN MOORE, Wisconsin
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
C O N T E N T S
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Page
Hearing held on:
September 28, 2018........................................... 1
Appendix:
September 28, 2018........................................... 31
WITNESSES
Friday, September 28, 2018
Astrada, Scott B., Director of Federal Advocacy, Center for
Responsible Lending............................................ 8
Cutler, Aaron, Partner, Hogan Lovells LLP........................ 3
Harrison, Dion, Director, Elevate................................ 5
Price, T. Michael, President and Chief Financial Officer, First
Commonwealth Financial Corporation, on behalf of the
Pennsylvania Bankers Association............................... 7
Rubinstein, Stuart, President, Fidelity Wealth Technologies...... 10
APPENDIX
Prepared statements:
Astrada, Scott B............................................. 32
Cutler, Aaron................................................ 56
Harrison, Dion............................................... 83
Price, T. Michael............................................ 90
Rubinstein, Stuart........................................... 100
Additional Material Submitted for the Record
Luetkemeyer, Hon. Blaine:
Letter from Credit Union National Association (CUNA)......... 108
Letter from National Consumer Law Center (NCLC).............. 109
EXAMINING OPPORTUNITIES FOR
FINANCIAL MARKETS IN THE DIGITAL ERA
----------
Friday, September 28, 2018
U.S. House of Representatives,
Subcommittee on Financial Institutions
and Consumer Credit,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9 a.m., in
room 2128, Rayburn House Office Building, Hon. Blaine
Luetkemeyer [chairman of the subcommittee] presiding.
Present: Representatives Luetkemeyer, Rothfus, Lucas,
Posey, Pittenger, Barr, Tipton, Trott, Loudermilk, Kustoff,
Tenney, Hensarling, Clay, and Green.
Chairman Luetkemeyer. The committee will come to order.
Without objection, the Chair is authorized to declare a recess
of the committee at any time. This hearing is entitled,
``Examining Opportunities for Financial Markets in the Digital
Era.'' And before we begin, I would like to thank the witnesses
for their participation today and for appearing before us.
Hopefully, this will be a little less drama than the hearings
on both sides of the building yesterday.
Before we begin, I think that we are going to have some
great information to discuss today, and I thank you again. And
so I now recognize myself for 3 minutes for the purposes of
delivering an opening statement.
This hearing is in regard to the U.S. Department of
Treasury report entitled, ``A Financial System That Creates
Economic Opportunities, Nonbank Financials, Fintech, and
Innovation.'' Last January, this subcommittee held a hearing to
examine developments in digital technology. Even since that
time, the various ways financial services are offered and
delivered, has changed.
Today, we continue our quest to examine the fintech
landscape and approaches to a smart and sufficient regulatory
regime. This hearing will expand on the recommendations of the
Treasury report and examine the current landscape, including
the need to modernize the existing regulatory framework, and
develop legislative proposals to allow financial services
entities to deliver new products and services to customers.
The pace of technological development in financial services
has increased exponentially and dramatically, offering both
benefits and potential challenges to the U.S. economy and
consumers. The reality is that innovation is critical to the
success of industry and the development of new products. It
helps to serve consumers' financial needs across the globe, as
well as potentially reduce operational risks of financial
institutions.
As more information becomes digitized, the protection of
consumer data becomes particularly important. We can't address
innovation and growth without addressing the security of that
data. I am glad the Treasury report made that a priority. The
Department has clearly outlined the need for a single Federal
data security and notification standard that raises the bar for
all industries, and ensures a better outcome for all consumers.
State authorities have attempted to harmonize standards,
but the results have been stunted. For every State that has
enacted a tough consumer notification requirement, two others
have failed to address the issue. Harmonization must be a
priority.
Two weeks ago, the Financial Services Committee passed the
Consumer Information Notification Requirement Act, my bill,
that would codify data security safeguards, and establish, for
the first time in history, a mandatory consumer breach
notification provision for all financial firms. The biggest
challenge to innovation is regulatory duplication and
fragmentation. Outdated and problematic regulations need to be
overhauled, and growth must be monitored, but not necessarily
slowed.
We have a very distinguished panel of witnesses before us.
The committee looks forward to hearing your diverse
perspectives and appreciates the time you have taken to appear
today. Thank you for your testimony. As Mr. Clay is not here,
we will recognize him upon his appearance for an opening
statement. But I do believe we need to continue, as we do have
votes scheduled here, I think it is now 11 o'clock.
So with that, the Chair now recognizes the Vice Chairman,
the member from Pennsylvania, Mr. Rothfus, for 2 minutes for an
opening statement.
Mr. Rothfus. I thank the chairman for yielding and for
calling today's hearing. Our financial sector has undergone
significant changes in the past few years. We have witnessed a
distressing trend of consolidation and closures, driven, in
part, by overregulation. As a result, some communities have
lost their local bank, and some communities have lost access to
services that they previously enjoyed.
Regulatory reform and technological advances can help the
financial sector regain its vibrancy. I am encouraged by
ongoing developments in the fintech space. It is important to
note, as some of our witnesses will do today, that fintech and
traditional banking do not need to be adversarial. Bank/fintech
partnerships are common, and they can help institutions augment
their services and reach new customers.
I am encouraged by this Administration's work to ensure
that nonbank lenders and fintech firms are subjected to clear
and robust rules, while facilitating continued technological
progress and allowing for healthy competition. I look forward
to hearing from our witnesses. And I yield back.
Chairman Luetkemeyer. The gentleman has yielded back. The
Ranking Member prefers not to have an opening statement. So
with that, we will go right to the testimony today. We thank
all of you for participating.
Mr. Aaron Cutler, Partner for Hogan Lovells, LLP; Mr. Dion
Harrison, Director of Elevate; Mr. Michael Price, President and
Chief Financial Officer, First Commonwealth Financial
Corporation, on behalf of Pennsylvania Bankers Association. And
Mr. Rothfus would like to make a special introduction of him.
Mr. Rothfus. Thank you, Mr. Chairman. Yes, Mr. Price is the
President and Chief Executive Officer of First Commonwealth
Financial Corporation in Western Pennsylvania and a constituent
of mine. He sits on the board of the Pennsylvania Bankers
Association, and he also serves on the Community Depository
Institutions Advisory Council of the Cleveland Fed and the
Business Advisory Council at Indiana University of
Pennsylvania.
Mr. Price grew up in Johnstown, Pennsylvania, which is also
in my district. He earned a degree in finance from the
University of Utah, and an MBA from Cleveland State University.
Mr. Price, thank you for testifying today, and I look forward
to getting your perspectives. I yield back.
Chairman Luetkemeyer. The next panel member is Mr. Scott
Astrada, Director of Federal Advocacy, Center for Responsible
Lending (CRL); and Mr. Stuart Rubinstein, President, Fidelity
Wealth Technologies.
Each of you are recognized for 5 minutes to give an oral
presentation of your testimony. Without objection, each of your
written statements will be made part of the record. Just a
little bit on the lighting system. Green means go; yellow means
you have 1 minute to complete; red means, hopefully, we can
wrap it up very quickly and stop. We do want to get done by 11
o'clock, not that this is not an important. We want to make
sure everybody has a chance to get all their questions asked,
and make sure all the answers are here. But we do need to make
this as compact as we can.
So, with that, again, I indicated to you, please pull the
microphones close to you. The lady at the end needs to
transcribe the activities and needs to be able to hear
everything that happens. As I told you, my wife screamed in
both ears and I have a hearing deficit problem, so you need to
pull it close so I can hear. So, we are excited, though, for
all of you to be here today.
And, Mr. Cutler, you are recognized for 5 minutes.
STATEMENT OF AARON CUTLER
Mr. Cutler. Thank you, Chairman Luetkemeyer, Ranking Member
Clay, and members of the subcommittee. My name is Aaron Cutler
and I am a partner at the law firm of Hogan Lovells. Any
statements I make reflect only my opinions, and do not
necessarily reflect the opinions of my law firm, colleagues, or
clients.
My full written testimony has been entered into the record,
and I will now give an overview. At the outset, I would like to
stress that I support agile and effective regulation that
enables the creation, development, and deployment of safe,
sound, and innovative consumer financial products and services.
Fintech products and services are already in use and
continue to be rapidly adopted. As noted by the Treasury's
recent report, up to one-third of U.S. consumers who are online
use no less than two fintech services. As GAO reported in 2016,
the U.S. financial services regulatory structure is complex,
and contains areas of fragmentation of overlap that lead to an
inefficient regulatory structure.
Several of the recommendations contained in the Treasury
report identify areas for improvement and increased
efficiencies. Overall, the Treasury report is a call to action.
Taking action on many of the recommendations could improve the
regulatory framework. These improvements stand to benefit
fintech entities, the industry at large, and consumers.
Financial institutions are sitting on a gold mine of
insightful data about each of their customers' spending habits
and use of funds. In the right hands, this data can be used to
promote sound financial management, assess risk, and support
consumers. It can also help with digital identity,
verification, or even to make risk assessments for insurance
products.
In many cases, however, it is not the financial
institutions themselves that are best able or motivated to
carry out this analysis, but innovative third parties with
greater expertise in data analytics. However, financial
institutions and data aggregators often find themselves at odds
over data sharing, this is in part due to the prevailing
regulatory regime.
Currently, financial institutions face uncertainty
regarding their liability for sharing consumer account data.
The Treasury report recommends that the Bureau confirm that
third parties given consumer authorized access be covered under
the definition of consumer under Dodd-Frank for the purpose of
sharing financial account and transaction data, thereby,
requiring financial institutions to share the data with these
third parties.
In my view, the overriding concern when setting a framework
for open access to transactional information should be to
ensure the security of the Count and credentials, facilitate
the customers' freedom of choice, and to allocate risk and
liability appropriately to protect the customer. Many fintech
companies are subject to the authority and supervision of State
banking departments and other financial services regulatory
agencies. Under the State regulatory regimes, fintech companies
are often required to obtain some form of State licensing and
registration.
State applications may ask for detailed information about
the company, key employees, executives, and owners. The
information requested may also slightly vary between States,
even though the objective is substantially similar. The
Treasury report identifies the State oversight and
harmonization challenges faced by entities offering financial
services products across multiple States.
Thus, it recommends creating uniformity to streamline State
supervision and licensing, such as adopting reciprocity-type
measures to help reduce redundancies in the licensing and
registration process. I fully support this recommendation.
Regulators and industry participants alike will also
benefit from the information obtained by testing new innovative
technologies. The purpose of a regulatory sandbox is to create
an environment for firms to try out new ideas without the
threat of regulatory penalty. By providing this environment,
regulators expect to create a range of beneficial outcomes,
such as reduced time to market for new products and services
due to firms having greater certainty as to the regulatory
treatment of those products and services; better access to
finance for firms seeking to raise funding for their new
products and services due to investors having greater comfort
that the business will be viable from operational and
regulatory perspective; the development of more innovative
products due to firms having the ability to test ideas and the
support of regulatory environment; and better outcomes for
consumers due to the better quality of testing that can be
applied within a sandbox environment.
Also, the use of the sandbox enables the regulators to
provide input on consumer protection features at an earlier
stage of the product development process. In the U.K., for
example, the financial conduct authority has established a
domestic regulatory sandbox, which has been used as a model for
other sandboxes around the word.
In conclusion, the Treasury report is a very good start,
and I commend the Treasury Department on its publication. Thank
you.
[The prepared statement of Mr. Cutler can be found on page
56 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Cutler. Mr. Harrison,
you are recognized for 5 minutes.
STATEMENT OF DION HARRISON
Mr. Harrison. I want to thank Chairman Luetkemeyer and
Ranking Member Clay for asking me to appear today to discuss
opportunities for financial markets in today's digital era.
My name is Dion Harrison, and I am the Director of Products
at Elevate. I have over 20 years of experience in the consumer
credit industry, and now, I am proud to work at Elevate, one of
the leading fintech companies in the United States. I am proud
because we work hard to fulfill our mission to serve good
customers in disadvantaged circumstances today, and provide
products that help them to have a better tomorrow. We are also
building consensus around key policy issues through our trade
groups, Teknek, and the Online Lender Alliance.
Headquartered in Fort Worth, Texas, and with an office in
San Diego, we served over 2 million American families through
the origination of almost $6 billion in nonprime credit to
date. We are the only fintech company to cap our profits so we
can reduce costs to consumers. We have lowered our APRs by over
50 percent since 2013, saving consumers over $4 billion
compared to payday lenders. And we have a customer centric
approach to designing and underwriting all of our products.
As members of this subcommittee know, the U.S. is still
recovering from the events of 10 years ago, which have
significantly reduced the credit available to nonprime
consumers by over $140 billion to date. Banks took a step back
and small dollar options for consumers evaporated, the 160
million Americans with credit scores below 700, who we call the
new middle class. To truly understand the needs of consumers
affected by these changes, Elevate created a research
institution called Center for the New Middle Class. The results
of our research so far has given us key insights.
African Americans are 80 percent more likely to live
paycheck to paycheck, they are also 2-1/2 times more likely to
overdraft their bank account. Hispanic nonprime borrowers are
more likely to experience higher levels of employment and less
volatile income, but less than 1 in 10 have a retirement
account.
What rings true about our research is that these Americans
need access to better small dollar loans, and my experience
tells me that partnerships between fintech companies and banks
are the key to building safer, more accessible, and inclusive
financial products. Fintech is already helping consumers by
increasing short-term credit access, developing payment
platforms, and helping consumers make better financial
decisions with new tools.
To build upon the momentum in our industry, Congress and
industry stakeholders should come together on the following
principles: Regulations should be pro-consumer and enable
innovation. Partnerships between banks and fintech companies
should be encouraged. Congress should act by passing
legislation that clarifies and fuels the creation of safe,
superior products.
As with any innovation, there will be staunch supporters
and fierce critics, but I am confident through transparency,
honesty, and results, Congress will see that leveraging the
strengths between banks and fintech companies is a powerful and
positive solution to filling many of the gaps in our financial
system. Bank/fintech partnerships are a win, win, win. Banks
are able to offer products to position themselves for the
future of a rapidly evolving industry.
Fintech companies like Elevate are able to efficiently
utilize data and analytics to better design and market safe
financial products. And consumers get access to credit
solutions that are quick, safe, and transparent. Consumers are
also able to escape bank deserts, as Representative Meeks
recently noted, fintech products can build a truly affordable
and healthy financial system for everyone.
Congress should ensure consumers continue to benefit from
these partnerships. I first want to thank this committee and
the House for passing a large bipartisan majority, H.R. 3299,
which clarifies valid-when-made. Similarly, I hope this
committee will pass H.R. 4439, which clarifies the true lender
issue.
Furthermore, we must address the lack of diversity in
fintech and technology more broadly. As Congressman Cleaver
recently stated, there are serious ramifications when companies
don't have a diverse workforce and don't understand or align
with the communities that they serve.
We must work hard to hold each other accountable. In our
business, we use alternative data sources to reach new
consumers and evaluate the risk drivers and affordability and
delinquency, but we must remain vigilant that our processes do
not include bias. And we must all be on the lookout for bad
actors who intend to create predatory products targeted at not
just nonprime, but all groups of consumers.
I want to thank you for inviting me today, and I look
forward to answering your questions.
[The prepared statement of Mr. Harrison can be found on
page 83 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Harrison. Mr. Price,
you are recognized for 5 minutes.
STATEMENT OF T. MICHAEL PRICE
Mr. Price. Thank you. Chairman Luetkemeyer, Ranking Member
Clay, and members of the subcommittee, my name is Michael Price
and I am the Chief Executive Officer of First Commonwealth
Bank.
Our community bank is privileged to help thousands of
consumers and family owned businesses buy homes, pay for
college, expand facilities, and hire new workers every year. I
am grateful for the opportunity to participate in this
important hearing and offer my perspective as a community
banker.
In my brief testimony, I want to stress three points:
First, community banks embrace and support responsible
innovation within our industry; second, I want to stress the
vital and visible presence of community banks throughout the
country; third, I want to emphasize that consumers and small
businesses are best served when all providers of financial
products and services are subject to a consistent and level
regulatory and supervisory playing field.
First Commonwealth has served as a trusted provider of
financial services for over a century. We embrace innovation to
better serve our customers. Financial technologies present
tremendous opportunities to customers and banks alike.
Technology empowers consumers to manage their financial health,
and affords access to credit for more borrowers. We
continuously invest in technology to provide state-of-the-art
solutions for mobile banking, mobile wallets, and mobile
deposit through a financial management application that teaches
and empowers our customers to budget, save, monitor spending,
and plan for the future.
Our innovation occurs within the framework of bank
regulation and supervision, and a culture of compliance and
risk management that ensures that all new products are safe and
secure before they get into a customer's hands. In short, the
community banks deliver innovative products through channels
customers can trust. However, technology does not replace a
community presence.
While First Commonwealth is embracing technological
innovation, we remain a visible presence supporting our
communities, as we always have, through countless hours of
volunteering, something that cannot happen through a computer
or mobile device. We understand our customers, and stand behind
them in good times and bad. We engage with our communities,
partner with local businesses, and will have the capital and
wherewithal to lend through the next economic cycle. We make a
difference.
My team in Indiana, Pennsylvania serves in leadership roles
at a local university, hospital, drug treatment facility, high
school, Chamber of Commerce, United Way, YMCA food bank and
homeless shelter, just to name a few organizations. Besides our
time, we also give generously to these local charities and many
more. We care about the vitality of our communities.
As a community bank, First Commonwealth is appropriately
subject to extensive regulation and regular and rigorous
examinations. We adhere to regulatory guidelines for vendor
risk management to ensure that service providers have robust
compliance and information security programs. Nonbanks offering
similar services do not have the same level of oversight. This
can allow problems and security vulnerabilities to go
undetected to the detriment of consumers. As a bank, we are
regularly examined for fair lending compliance.
While nonbank lenders may be subject to fair lending laws,
they are not routinely examined for compliance unless a
consumer complaint triggers an investigation. I believe
customers should expect the same reliable experience and
protections, whether they are dealing with a bank or a nonbank.
The best way to achieve a consistent customer outcome is
for regulation, and more appropriately, supervision to be based
on activity rather than the type of company that conducts the
activity.
Many of the innovations at their core are traditional
banking products offered in new ways. By focusing on the
activity taking place, regulators are best able to assess the
risk, being presented to consumers and the system. Activity-
based regulation and supervision would level the playing field
and ensure that consumers enjoy the same protection of benefits
across the vast landscape of financial service providers.
Once again, thank you for the opportunity to offer my
perspective, and for your attention to the importance of
responsible innovation in financial services. Thank you very
much.
[The prepared statement of Mr. Price can be found on page
90 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Price. Mr. Astrada,
you are recognized for 5 minutes.
STATEMENT OF SCOTT B. ASTRADA
Mr. Astrada. Thank you. Good morning Chairman Luetkemeyer,
Ranking Member Clay, and members of the committee. Thank you
for inviting me here today to testify about the opportunities
and challenges posed by fintech in the financial services
marketplace, the current regulatory and consumer protection
landscape, and the need to ensure that emerging products and
market participants best serve consumers.
I am the Director of Federal advocacy at the Center of
Responsible Lending, a nonprofit, nonpartisan research and
policy organization, dedicated to protecting homeownership and
family wealth, by working to eliminate abusive financial
practices. CRL is an affiliate of Self-Help, a non-profit
community development financial institution. In total, Self-
Help has provided over $6 billion in financing to 70,000 home
buyers, small businesses, and nonprofits. And currently serves
more than 80,000, mostly low and moderate consumers, through 30
retail branches.
This important hearing addresses how technological
innovation has resulted in the development of new services and
delivery platforms by both traditional financial institutions
and nonbank fintech companies. The rapid expansion of market
participants and their products has brought new opportunities
as well as significant consumer protection concerns to the
financial marketplace.
In my written testimony, I discussed in detail the
essential legal questions and consumer protection issues that
are necessary to be at the center of this broader fintech
dialog. Specifically, in relation to the recent Treasury
fintech report, CRL, along with numerous civil rights groups
and State attorneys general, have expressed significant concern
about the impact that the Treasury report's recommendations
would have upon consumers.
We reviewed the report, as we do fintech in general, in the
context of our central priorities. First, preserving the
progress made by State and Federal stakeholders to guard
consumers from predatory debt trap products. Second, ensuring
fintech lending evolves in cadence with existing and developing
consumer protection laws. And, third, the preservation of State
usury laws. CRL is very wary of unscrupulous actors and payday
lenders adopting the banner of fintech for the purpose of
evading consumer protection laws, particularly State level rate
caps, while also using the veil of innovation as a
justification for exemption from longstanding consumer
protection laws and regulations.
Ultimately, there is no getting around the fact that a bad
loan is a bad loan, regardless of whether it is delivered
through a technologically advanced medium or algorithm or
storefront. At that same time, we are well-aware and very
encouraged by the potential benefits of fintech, especially as
it relates to affordability and financial inclusion.
CRL is dedicated to ensuring that consumer marketplaces are
fair, transparent, and equitable, and we are appreciative of
the opportunity to contribute to this discussion. While we are
all admittedly unsure of what fintech can deliver over the long
term, in terms of financial inclusion, we do know for a fact
what happens when consumers are left in the cross-hairs of
predatory lenders.
Short-term payday loans and car title loans cost borrowers
$8 billion a year, and many times lead to other significant
financial challenges, overdraft fees, loss of a checking
account, debt collection costs, even bankruptcy. The evolving
fintech marketplace should focus on historically proven
consumer protection laws and the components of responsible,
equitable, and wealth building lending. We have a unique
opportunity with the emergence of fintech to build strong
consumer protections and equitable financial access at the
front end of fintech development, and into the very foundation
of the marketplace itself.
Furthermore, we have an opportunity to correct and remedy
the current marketplace inequities that have been systemic by
ensuring consumer protections is an integral part of the
financial marketplace. If we get this wrong, we will set the
stage for future generations to suffer from the same financial
inequities of the past. However, if we do this right, we could
set a trajectory for millions of Americans toward economic
prosperity.
Thank you again for the opportunity to testify, and I look
forward to answering your questions.
[The prepared statement of Mr. Astrada can be found on page
32 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Astrada. Mr.
Rubinstein, you have a really high bar to hit here because
every one of those guys came in under the 5 minutes.
Mr. Rubinstein. Thank you.
Chairman Luetkemeyer. You are recognized for 5 minutes,
sir.
STATEMENT OF STUART RUBINSTEIN
Mr. Rubinstein. Thank you, Chairman Luetkemeyer, Ranking
Member Clay, and members of the subcommittee. My name is Stuart
Rubinstein, I am President of Fidelity Wealth Technologies and
head of data aggregation at Fidelity Investments. Fidelity is a
leading provider of investment management, retirement planning,
brokerage, and other financial services to more than 30 million
individuals, institutions, and intermediaries, with more than
$7 trillion in assets under administration. We are also strong
supporters of fintech and a major fintech investor.
I am appearing today to represent Fidelity with a specific
focus on the topic of financial data aggregation. At Fidelity,
we have a unique perspective: We are an aggregator ourselves,
and we are also a source of data to aggregators who act on
behalf of our customers.
Fidelity is a strong believer in the benefits our customers
receive when they can see a consolidated picture of their
finances. We have offered aggregation services to our customers
for well over a decade, and our customers have been able to
access their Fidelity data through various third parties since
the 1990's. But the cybersecurity environment has changed, and
risks have become far more pronounced and must be addressed.
First, most financial data aggregation that occurs today
requires consumers to disclose their financial institution,
user name and password, to the third party aggregator or
fintech. While this process may have worked in the past, there
are new technologies that eliminate any such requirement.
Because cybersecurity is of paramount importance, we believe
that customers should not have to disclose their user name and
password in order to use any third party service.
Second, aggregators using credentials may have access to an
entire website or mobile app, which means they can access more
data than may be necessary to provide their services. For
example, a simple app that tracks your spending does not need
to know your investment holdings, but it will have access to
that under the current methods. Because of the advancement of
cyber threats, Fidelity and others in the industry having been
working hard on developing a different approach to data
aggregation that helps to protect consumers. At Fidelity, we
have developed five principles for empowering consumers to
share their data safely with third parties:
One, consumers should be able to access their financial
account data wherever they want, when they want it, and through
third parties. The question is not if they can access their
data, but how; two, access must be provided in a safe, secure,
and transparent manner; three, consumers should provide
affirmative consent and directly instruct their financial
institutions to share their data with specific third parties;
four, third parties should access only the financial data that
they need to provide their services. This should not be a
Trojan horse for the gathering, accumulating, and reselling of
consumer data; and fifth, consumers should be able to monitor
account access rights and direct financial institutions to
revoke that access.
To back these principles with action, Fidelity announced in
November 2017, a new service called Fidelity Access. Fidelity
Access will allow customers to provide third-party access to
their customer data through a secure connection, and without
providing log-in credentials to any third party. The most
difficult issues standing in the way of wider adoption of safer
data sharing technologies is the issue of responsibility. We
believe companies that collect and handle financial data should
be responsible for protecting that data and making consumers
whole if misuse, fraud, or theft occurs.
As we have been discussing Fidelity Access, we have seen
aggregators try to limit liability, some to very small dollar
amounts. Fidelity believes firms that obtain and handle
consumer data should be held responsible to protect that data
from unauthorized use, just as we are. Any other standard
creates moral hazard and does not require aggregators to take
their data stewardship responsibilities seriously.
Finally, the complexity of 50 different State laws to
notify a consumer of data breach is significant. We are
encouraged by the committee's recent consideration of
legislation to create a single Federal data breach notification
standard. Consumers could benefit from a uniform Federal
standard that requires clear and timely notification of a
material breach of personal information.
Thank you again for the opportunity to testify before you
today. I look toward to answering your questions.
[The prepared statement of Mr. Rubinstein can be found on
page 100 of the appendix.]
Chairman Luetkemeyer. Thank you, Mr. Rubinstein, well done.
The Chair now recognizes himself for 5 minutes to begin the
questioning.
Mr. Cutler, you have written extensively on the growing
fintech marketplace and what the challenges are and innovation.
I know you talked a little bit about the regulatory sandbox.
How do you believe that it is best structured? Is it to allow
the fintech company before it is chartered, after it is
chartered, whenever it becomes a part of a bank or credit union
or other entity, or should you just allow the fintech company,
before it ever becomes affiliated, to be in the sandbox to
develop its products? Can you just elaborate, please?
Mr. Cutler. Thank you, Mr. Chairman. Actually, I think
before they become a fintech, before they get their charter
would be a good place to allow them to enter the regulatory
sandbox early on in that process, as they are trying to figure
out where they should go, should they enter into a partnership.
As they are figuring it out, it would be good if they could be
part of that sandbox.
Chairman Luetkemeyer. I would assume that company would
have to show that it is viable to be able to be doing something
like that. You can't just have somebody come in with an idea
and a whim and be able to get a safe harbor here to go and
develop a product--would that be--
Mr. Cutler. Absolutely, they would have to open the kimono
with the regulators at that point and have that conversation.
Chairman Luetkemeyer. Very good. Mr. Price, you talked a
little bit about some of your fintech activities, and last
night I met one of Mr. Barr's constituents, who is a banker
from Lexington, and they were using tellers at kiosks. Instead
of a real teller, it was a teller who was technologically
behind the screen somewhere and they were able to talk to him
on another screen in the lobby. So they didn't really have any
physical people in the lobby, but they had some physical people
actually doing all of this.
Have you done some research to see--I guess I am curious
about the numbers, what people would be interested in this?
Last night the banker was adamant about they did the research
to show this is something people wanted, but I saw some numbers
recently that indicated, even the millennials, only 6 percent
of the people didn't want to touch somebody, 51 percent of them
did want to touch somebody, they wanted to be able at some
point be able to go to a teller and be able to talk across the
counter. What numbers can you talk to us about this morning?
Mr. Price. Thank you, Mr. Chairman. The number I recently
saw actually 2 days ago from an industry expert was 46 percent
of people still go in the branch, and then now 54 percent do
things totally digitally. And when they have a problem, they
still want to get somebody by the throat or hold their feet to
the fire and get in front of us at the branch. But those are
the basic numbers. And I have to tell you, I think Congressman
Rothfus said, this is an adversarial, it really isn't. We have
mobile wallets. We have online lending. We have the same kinds
of--the kiosk idea, we think about our customers, interface
digitally, those of the types of things we are exploring as we
speak. Umpqua just in the last week came out with a concept,
Best Banker Forever, where you are interacting with a person
mobily.
So these--the fintech companies have really pushed the
space, and I think will make it terrific for clients, and we
look for all kinds of opportunities to partner with them, and,
in fact, we are already doing that.
Chairman Luetkemeyer. I assume there needs to be some
structure in place to be able make sure this is done. Now, Mr.
Rubinstein made some great points here with regards aggregating
data and access for people to their data, but also trying to
find a way to protect that data. There is a line you have to
walk here.
Mr. Price. There is. And I would just say, a bank charter
is a bank charter. No bank-like charters, regulatory oversight
exams, if you are engaged in banking activity, and that
includes the full enchilada, things like CRA (Community
Reinvestment Act), HMDA (Home Mortgage Disclosure Act), fair
lending. And not just laws, but also you have to have
supervision. When the examiner comes in and takes 40 or 50 of
my loans and grades them, that is a different bar than if
somebody sues me civilly, because I am accountable quarterly
for exams and exam outcomes.
Chairman Luetkemeyer. Mr. Rubinstein, would you like to
comment on that last comment? Elaborate on your testimony?
Mr. Rubinstein. Very simply, different firms have consumer
data, and right now are held to different standards. We have
banking standards, the SEC has standards on firms like us.
Fintech firms are able to use that data and provide very
helpful services, but they are not subject to the same
standards. And I think that is--at the end of the day, it is
important to have a level playing field. But I don't believe
the consumer understands the difference if one firm holds the
data or another firm does, we just want to make sure we have
those same protections.
Chairman Luetkemeyer. Thank you. My time has expired. And
with that we go to the gentleman from Missouri, the other
gentleman from Missouri, Mr. Clay is recognized for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman. And let me thank the
panel for their participation in this hearing. I will start
with Mr. Astrada. I see that the Center for Responsible Lending
was listed in Treasury's fintech report as being an
organization the Department consulted with. Can you please
share with us how your meetings with the Department went, and
did they take your advice?
Mr. Astrada. Thank you, I am more than happy to share. I
will start that we did not actually meet with Treasury, despite
being listed in the appendix. To be as forthcoming with the
committee as possible, the process was earlier this year,
Treasury staff reached out to us to come in and talk about the
report, and I was the designated lead. I responded and said we
would love to come in and talk, as we usually do. I did not
receive a response to that email. I followed up a few weeks
later and did not receive a response to that email, and
followed up one last time a month after that, and did not
receive a response.
So we were quite surprised to be listed in the appendix. We
assumed the best, in that it was a technology oversight.
Mr. Clay. I wouldn't go that far, but I am sure that is
something Treasury can answer for us. Let me ask you, what are
your views on creating some regulatory sandbox for fintech? Are
there certain aspects of the fintech landscape that would be
better suited for such a sandbox? And what parameters would you
place on a sandbox?
Mr. Astrada. That is a great question. And I will zoom out
from the consumer experience aspect of it in terms of the
terminals and branches and talk the policy and process aspects
and our concerns with that. On a broad level, it really is a
bad deal for consumers. It is trading well-established, long-
established consumer protection laws, especially as it comes to
civil rights and anti-discrimination for the promise of
innovation for the broader society.
I think one of our, just initial issues is innovation is
one of those terms that if you ask 10 people what it means, you
get 11 answers. And that can be really stretched, either from a
product level or even nefariously in terms of delivering
predatory loans through new technological platforms is not
innovation, and is not deserving of any exemption, in fact,
quite the opposite. And I think the process of cutting out
stakeholders, consumer groups, civil rights groups, not going
through notice and comment, not going through the well-
established APA procedures, to, again, double-down on this
notion of a very vague conception of innovation is very
problematic.
And on the consumer level, if you really talk about the
permanency of some of the negative impacts that can follow
individuals their whole lives, if not generations, you might
have a great exit plan in a business if it fails, but what
about those consumers? And the only thing that comes to mind is
an Atlantic article from earlier this year, based on an MIT
study, that says, To escape poverty, on average, you need 20
years for nothing to go wrong. No medical emergency, no job
loss. That is a crazy amount of time.
And if you talk about regulatory sandbox, especially in
financial inclusion, you set up for a tradeoff between well-
established civil rights laws for this promise of innovation
that is not even strictly defined, and the consequences can
follow individuals for their whole lives.
Mr. Clay. And just as a follow up to Mr. Harrison. How does
Elevate protect against unintentional discriminatory practices?
Mr. Harrison. So, thank you, Congressman Clay, for that
question. Elevate is very focused on making sure that we
protect our customers in every way. And we have leveraged a lot
of different types of data in order to more broadly serve
customers that are in disadvantaged areas. And, in fact, we
take it very seriously to make sure that we are in compliance
with regulations also. We are subject to, with our bank
partnerships, we are subject to the same regulations that all
of our banking institutions are. And we do internal reviews
ourselves so that we can make sure we are monitoring and
checking ourselves for our fair lending practices, but we also
get third party validation of all of those. Those are
independent reviews that we do on a very regular basis to make
sure that we are in compliance with those.
Mr. Clay. And the brick and mortar banking industry?
Mr. Harrison. Yes, sir. And we absolutely, whenever we
partner with a banking partner, we adopt their policies on fair
lending and such, so that we are always subject to those
regulations, and we hold ourselves accountable to that. And we
provide our reporting of the independent audits, and they have
the rights to come in and audit us as well to make sure we are
in compliance with all of those policies.
Mr. Clay. I am sorry, Mr. Chairman, I went over.
Chairman Luetkemeyer. That was a great question. Thank you.
Thank you for that. The gentleman's time has expired. With
that, we go to the gentleman from Pennsylvania, the Vice Chair
of the committee, Mr. Rothfus, for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman. Mr. Price, I want to
talk a little bit about something you said in your testimony
about the importance of having a community presence. As we see
the ongoing evolution in society, things moving digitally and
people liking the convenience of that, here is this issue of
the presence in the community. What do you mean by that?
Mr. Price. I think we can have the best of both worlds,
digital--and I think community and banks should thrive in their
communities. I think it is important we know our borrowers, our
businesses. We are the number two SBA lender in western
Pennsylvania, as a relatively small bank, because we are in the
towns and we know the people and we are connected in the
communities.
There are a lot of projects that happen in a community that
wouldn't happen without that knowledge in a community. For
example, we just did a drug and alcohol facility in a small
town. We raised the money with local businessmen as seed money.
We encouraged, coached, and counseled the leadership team. Two
community banks came together to fund that enterprise; it's
been up 2 years, it is very successful. It was coordinated with
the public sector, public officials, businesses, healthcare.
Those are the kinds of things that happen with hospitals
and retirement facilities that community banks and banks and
others are at the vortex of, I just think are really important,
and make a difference in the economic vitality and the growth
of those places, and their livability. And I am proud to say
that we do that. And it is fun, too.
Mr. Rothfus. You also talked about bank/fintech
partnerships and the mutually beneficial relationships that
traditional banks and startups can develop. Can you describe
some of the partnerships that First Commonwealth has with
fintech companies today?
Mr. Price. Yes, we do a lot, quite frankly, through our
core technology provider who forges those partnerships on our
behalf. Bigger banks buy fintech companies, smaller banks
necessarily can't, but we can still have access to them through
our core provider, and there are three or four large core
providers.
Mr. Rothfus. So you don't see an option for a bank of your
size to purchase a fintech company?
Mr. Price. No. And that puts us a little bit behind the
starting line, there is no doubt.
Mr. Rothfus. Mr. Harrison, in your testimony, you
encouraged partnerships between banks and fintech companies.
How do these partnerships help the firms serve more consumers?
Mr. Harrison. Thank you, Congressman, for that question. I
think in the case of Elevate, we have spent the last decade
ensembling lots of different types of data to make sure that we
can reach a broader group of customers. Traditionally there are
customers, such as Experian and Clarity that have actually
partnered together to make sure that they understand where
customers are actually spending their money or borrowing money
from. And we can take that information and get a more holistic
view of where our customers are actually lending or getting
money from.
We then take that information and we provide it to banking
institutions to show them that there is a different way of
actually underwriting, there is a different way of reaching
those customers, and that there are people that are actually
invisible to the mainstream credit profiles today that
absolutely are disenfranchised and live in banking deserts and
that can't reach a community banking institution that we can
start to find for them.
Mr. Rothfus. If we can follow up on that because I know the
Ranking Member was bringing this issue of reaching out and
serving those under-banked minority communities. I want to talk
a little bit about the how. How can this work? How can fintech
help to provide services to more minority borrowers who are
currently under-banked? How does that process go?
Mr. Harrison. I think Mr. Price actually hit the nail on
the head that the community banking institutions are still a
trusted entity within their community, and I think that we
would like to--
Mr. Rothfus. But if there is a community that doesn't have
an institution?
Mr. Harrison. Yes. That is absolutely correct.
Mr. Rothfus. How can that be leveraged to reach those
folks?
Mr. Harrison. Through our technology platforms. They do a
lot of online platforms that allow customers to find us over
the internet, and we have been able to reach a number of
different customers that do live in areas that are typically
considered to be geographically bank deserts. We are going into
those communities that, probably more predominantly, have
check-cashers and payday lenders in their community, and we can
take them away from those because we can provide a better
alternative solution and a much more cost effective and safe
product for them.
Mr. Rothfus. Thank you. I yield back.
Chairman Luetkemeyer. The gentleman yields back. With that,
we go to the gentleman from Texas, Mr. Green, who is recognized
for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witnesses
for appearing as well. If I may, I would like to start with the
notion that the OCC (Office of the Comptroller of the Currency)
may be accepting applications for a fintech special purpose
national bank charter. And I am concerned about this because,
obviously, there may be some predators out there who can see
opportunities. I am also concerned about how this will impact
the CRA.
As you know, there are moves afoot to revise, reform,
somehow amend the CRA. So let me start with you, Mr. Astrada,
would you kindly give me some indication as to the concerns
with predatory lending as well as the impact on the CRA? And I
am going to give you about 2 minutes to do it because I have
another question.
Mr. Astrada. Thank you. I will be quick. Thank you for that
question. And the OCC fintech charter really is a big concern
of ours in terms of the written testimony I submitted, and the
preemption of State usury caps is one of the best protections
we have seen against predatory lenders. And I think what we
have to step back and realize is that 10 years ago it was a
research question that payday loans were bad. That is no longer
an argument. That is settled. And I think it is settled in
academia, it is settled on wide slots of the industry.
What happened, that evolved with fintech into high cost
lenders migrating to online saying, Well, we are not payday
lenders, we are different. Or simply relying on a consumer
choice theory that individuals should be free to choose
whatever they want. CRL has serious issues with both of these,
and I will spend time on the former, is that the bank
partnership model is not what we are here to argue about. What
we are here to argue about is explicit preemption of State
interest rates across the whole country that has shown--a model
that has shown--
Mr. Green. One minute left.
Mr. Astrada. You can't separate substance from form. So
this bank partnership, for decades, has shown a propensity to
be taken advantage of by unscrupulous lenders. Even more so in
the fintech space. Under previous regulators, it was shut down
in the 2000's, but we have seen this spring up again and again
with many lenders, and this is an unequivocal loophole for
these lenders to hijack whatever the explicit intention of the
OCC is to provide financial inclusion. Without addressing the
State preemption issue--without addressing the reality that
this partnership model has clear openings for predatory loans,
it is ill-advised and we strongly opposed the move.
Mr. Green. The CRA, quickly.
Mr. Astrada. CRA, I think, is directly related to this in
terms of using financial innovation as a narrative to say why
CRA is broken. It is not. It has continued to be one of the
main drivers of equity. It can be a straightforward update when
you talk about innovation of product delivery rather than
product itself.
So what I mean by that is that creating some type of
national market with no assessment zones and decoupling the
fundamental connection of race and the point of CRA, which is
well-established in the legislative history, you turn the CRA
into some market base incentive plan instead of an
accountability law of civil rights and inclusion of what it was
meant to be. I think some of the proposals coming from the
comptroller fundamentally move very far away from what CRA was
intended, under a narrative of the need for fintech innovation.
Mr. Green. Thank you very much. Mr. Rubinstein let's talk
about data protection, and I am concerned about data protection
from hackers as well as attackers. The hackers are the folk who
would want to have some personal gain as a result of their
dirty deeds. But the attackers can be nation states who want to
disrupt economies, who want to sow the seeds of discord within
a society.
So the question for you is, how do we protect ourselves
from hackers as well as attackers, given that we have had some
unfortunate circumstances with voting in the United States,
questions about Russian intrusion into an election? Help me,
please. You only have 20 seconds to do it, I apologize.
Mr. Rubinstein. Congressman, that is a big question that we
work on every day. At Fidelity, we employ every modern
technique we can. Plus, we have a group focused on emerging
techniques, but we do fight off hackers and attackers on a
regular basis. Our job is protecting those assets, which is why
we are so concerned about other firms that have access to
things like IDs and passwords, or access to the customers--
access to their site, that we need to protect against every
different type of attack. We can certainly follow up with you
afterwards.
Mr. Green. Thank you very much. Thank you for the extra 18
seconds, Mr. Chairman.
Chairman Luetkemeyer. Thank you, gentlemen. Your time is
expired. With that, we go to the gentleman from Kentucky, Mr.
Barr, you are recognized for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman. Mr. Harrison, I wanted
to ask you a little bit more about how fintech partners with
community banks and in rural Kentucky, we have a lot of
community banks, but maybe not as much fintech. But explain a
little bit more how fintech companies can expand access to
financial services in rural America?
Mr. Harrison. Thank you for the question, Congressman Barr.
I believe Elevate, in particular, has a unique way of actually
approaching our customers to evaluate what the actual need is,
and we would love to be able to partner with more community
banks to design different types of products. I think that our
prowess in technology, coupled with the high-tech environment
and the really more intuitive understanding of the customer
from the community banking institutions will help to marry
together much more efficient and much safer and more relevant
products that can actually help us to reach broader communities
also.
Mr. Barr. We continue to hear that the Modernizing Credit
Opportunities Act, the true lender solution, and the valid-
when-made legislation, are critical in terms of removing the
impediments to expanding and amplifying the fintech community
bank relationships. Can you explain--and, obviously, we
recognize that the Treasury Department has made those
recommendations to get those solutions into permanent law. Can
you explain to me how those solutions would expand access to
more services and products?
Mr. Harrison. Absolutely. I think that community banks in
general have been hesitant to engage completely with a lot of
fintech companies because of the lack of regulatory clarity. I
think with that type of clarity and continuous to have
conversation and dialog around those regulations that fintech
companies will absolutely step up to the plate and make sure
that we are in compliance with all of those and make sure that
we assist the banking in keeping their good rapport with the
bank examiners and the regulators as well.
Mr. Barr. Mr. Price, can you comment on the question, tell
us why the true lender and the valid-when-made, the solutions,
would be helpful, or how would that change the landscape?
Mr. Price. Thank you for the question, Congressman. I think
what fintechs can bring to the table sometimes is edges of
innovation in ways of doing things. Now, those things have to
prove themselves out through the next cycle, and I have been
through three or four of those. I am sure they are mindful of
that. But I struggle sometimes, we, probably 3 or 4 years ago,
we met with probably the top five alternative lenders in the
company, and they weren't that interested in talking to us.
They came back to us a few years later very interested in using
our balance sheet, but they still own the customer.
So what we have done, quite frankly, is we have developed
our own online lending capability and deposit gathering
capability. We will continue, and I am sure we will have some
partnerships, we certainly have it with fintech companies in
other disciplines, whether it is personal financial management
tools, et cetera, but lending, we just haven't struck a cord
yet.
Mr. Barr. On this question of greater harmonization and
uniformity, can--Mr. Astrada, I was struggling a little bit
with your testimony. Can you explain why you are so averse to
better harmonization and uniformity?
Mr. Astrada. Yes, it is not so much that we are opposed as
the legislative affect that this would have on consumer
lending. I think taking an expansive view of predatory lending,
the difference between getting an 800 percent APR loan and a 90
percent APR loan nominally is a plus. But when you look at the
consumer protection issues of State preemption, when you look
at, no matter whether you default in a 90 percent loan or a 100
percent loan or a 300 percent loan, the impacts of that default
are real. So it is a question of affordability. It is a
question of ability to repay and it is a question of
underwriting.
So what these bills would do on the true lender aspect
would be ignore what seems to be called friction in the
industry as a legal tool to root out sham lending.
Mr. Barr. If we did an OCC charter, it would be optional.
In other words, it wouldn't be a mandatory preemption, it would
be optional, to access a Federal uniform interstate
harmonization. So it wouldn't necessarily preempt State
consumer protection laws?
Mr. Astrada. Oh, I thought you were referring to the valid-
when-made in true lender bills, not the OCC charter. That is a
semantic difference for us, but a real one. But I think the
legal theory behind the true lender bill would ignore economic
reality in favor of fiction of just who is on the dotted line,
and that comes at the expense of a legal tool that has
historically been very effective in rooting out sham
partnerships. On the valid-when-made aspect, I think the legal
theories that the bill relies on, and I borrow this analysis
from Professor Adam Leviton, is incorrect, that there is no
longstanding valid-when-made doctrine. The National Bank Act
wasn't passed until 1864. That in his research, he found no
cases that deal with these various assignments until the late
20th century. So the Nichols case that the bill relies upon, I
think, is an overreach in terms of the conclusion of defining
the problem that the bill seeks to solve, and the consumer
impact reality of what that bill would do would, one, rob the
legal system of calling out and investigating sham
partnerships, and on the valid-when-made, create a great
benefit for secondary market securitization, but at the cost of
unaffordable lenders taking a very expansive view of what
predatory loans are for the consumer. Sorry for going over.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentlelady from New York, Ms. Tenney,
is recognized for 5 minutes.
Ms. Tenney. Thank you, Mr. Chairman. I thank the panel for
being here today, it is an interesting topic. I first wanted to
address my questions to Mr. Harrison. You mentioned the term
``banking deserts,'' and I represent central New York, upstate
New York, and we have a lot of bank deserts. I have an entire
town that doesn't even have a bank, they have to go to an ATM.
We have a lot of small community banks that have been lost, a
couple have been preserved, especially thanks to the latest
reform that we did to give them a little bit of a break on a
number of issues, especially the Dodd-Frank reform bill that we
recently passed, 2155. But we still have an issue where--I met
with a number of the community banks, and they were concerned--
when they talk about fintech--they are concerned that there is
somehow a person behind a computer and they don't really know
the face or the name. I am curious about the possibility, and I
am open-minded about the possibility. If you could just explain
a little bit about the rural maybe--and possibly even in urban
areas, although I have smaller urban areas--how fintech can
partner in a way with community banks that is transparent, that
gives people the confidence they have in their hometown
community bank. If you can just give me a quick way that you
think, maybe 1, 2, 3, what the best ways you can do that are?
Mr. Harrison. Sure. Thank you for the question. I think
that where we can enable different types of technology to reach
customers in those rural areas is really by using online
resources, and being able to partner with the banking
institutions in community areas to find out how do we get to
those customers? I think that we have been able to really go
into communities that are, again, predominantly with payday
lenders, and we have been able to bring those customers back
away from there and understand that they can access a lending
platform through their mobile phone over the internet in a lot
of different ways and be able to get fast decisions that they
don't have to wait for long periods of time in order to know
when they have been approved or not.
We have been able to save customers over $4 billion as an
alternative payday product. We believe that we can get even
better than that as we continue to reach out to those
customers.
Ms. Tenney. Yes. Can you just get a little more specific?
You say we can get to the customers. How do you actually get to
the customers, because these are presumably the bank's
customers?
Mr. Harrison. They are.
Ms. Tenney. How do you work with the bank and partner with
them so they don't lose their customer base, so they are not
obliterated by some of these huge banks that come in and, they
are on an 800 number--my bank, I can walk in--it is a lovely
little community bank, it has been around for over 100 years. I
can still walk in and hand my checkbook to the note teller, and
she balances my checkbook while I go and talk to the bank
president. It is that close community feel that I know that I
can trust them. But what do you actually do? Do you partner
with the bank to reach the customers?
Mr. Harrison. Yes.
Ms. Tenney. What is your marketing plan to get to them?
Mr. Harrison. So we have talked to bank presidents that
have actually told you us, I have customers that have a
checking account with me that have a 500 FICO score, but they
don't qualify for any lending product that I have because the
lowest that I can go is 700 for their lending products.
What we have been able to do is talk to them about what is
the actual need. A lot of times, they will tell us that they
are short-term loan products, which is within our wheelhouse to
do. So we will absolutely partner with them to market to them
through either direct mail, or we can actually create programs
that market directly through the banking institution itself.
Ms. Tenney. So how do you actually provide the service? It
is like a service for the bank in the partnership? So you would
say, we are going to provide you some--save you cost to the
bank, for example, a small community bank on online--how do you
partner with them in a regulatory environment, like say, New
York, where it is very difficult to do anything, let alone
partner as an outside company, an outside financial institution
trying to work within maybe a community bank atmosphere to help
them with their online presence? I don't mean to get into the
details too much, but how do you share profits? How do you make
a decision about whether a loan is going to be made or not?
Does the community bank make that? Who bears the liability?
Does the fintech company bear the liability, or does the small
community bank?
Mr. Harrison. The bank is always absolutely the lender in
these business ventures, and we are simply a service provider
to them. We help to enable them to do this outreach to their
customers through a lot of different channels. We look at what
they are currently doing, and then we talk to them about what
are the ways that we can more cost effectively outreach to
those customers. We have a lot of infrastructure ourselves. We
are a huge direct mail marketer--
Ms. Tenney. Do you have any of these partnerships with
community banks right now?
Mr. Harrison. Yes, we do.
Ms. Tenney. You do?
Mr. Harrison. Yes. We have a couple of bank partnerships,
one in Provo, Utah, one is Louisville, Kentucky, where we have
partnered with the community banks to actually help them to
enable a national product.
Ms. Tenney. Thank you very much, appreciate it. I think I
am out of time. Thanks so much.
Mr. Harrison. Thank you.
Chairman Luetkemeyer. The gentlelady's time has expired.
With that, we go to the gentleman from Georgia, Mr. Loudermilk.
Mr. Loudermilk. Thank you very much, Mr. Chairman. I thank
everyone on the panel for being here today. Look, as spending
over 20 years in the technology sector, finding ways to use
technology effectively, efficiently, and securely, to improve
our quality of life, to improve efficiency in business is
extremely important to me. Fintech is also extremely in my
district. Georgia is a home of fintech where 70 percent of our
Nation's payment processing is done. We are also considered the
Silicon Valley of the south, a lot of startup businesses
beginning in Georgia. Our legislature--working with our
legislature to make sure that we are doing the right things to
keep those businesses in Georgia as well. I am very excited
about a lot of what we are doing.
But from a cybersecurity aspect, I do have some concerns.
That is one thing we have been working on as a committee is the
patchwork of standards that we have currently regarding data
security, protecting personal privacy, et cetera. Our committee
just passed a bill of couple weeks ago that would help with
that.
So my questions are going to be around this area, as far as
a regulatory area regarding cybersecurity, et cetera. First
question, Mr. Price, why is it so important for consumers in
different States to have the same expectations and data
security standards that their bank or credit union must adhere
to?
Mr. Price. I think because lending people money or taking
deposits is serious business. A new house, an education, a car,
these are seminal moments in people's lives, and these
decisions demand people's attention and a lot of carefulness
and thoughtfulness on our part as well.
The other thing I would add is, as a bank, we are subject
to something called FFIEC (Federal Financial Institutions
Examination Council) guidance, it is part of the regulatory
standard, it is four or five standards, it includes everything
from tabletop exercises, ethical hacking, phishing exercises,
are all part of evolving our defense continually when it comes
to securing data and protecting customers. I do think the
standard is higher for community banks than it is for our
fintech partners. I think they have more of a reactive
regulatory framework with FTC in a safeguard-type of approach.
My comments earlier were I think the playing field should be
level, and I think that is fair.
Mr. Loudermilk. To follow up on that, what are the
compliance challenges that the industry faces with the
patchwork of sometimes conflicting data security and breach
notification laws?
Mr. Price. I can't speak specifically to that other than to
say, in general, we have gone from 14,000 to about 6,000
community banks. That is not the answer to banking deserts. I
think regulation has--the bar has been raised. We got some
recent relief--thank you--but I think the regulation needs to
be consistent, from fintech to bank to big bank, community
bank, and appropriately tailored, if you will.
Mr. Loudermilk. OK. I appreciate that. I have had some in
the financial services sector come to me and complain that if I
am in compliance in one area I am out of compliance in another,
just because of the conflicting nature of these. So I
appreciate that.
Mr. Rubinstein, I understand your company is developing
innovative new ways to protect your customers' data when they
use third-party data aggregators by eliminating the need to
copy usernames and passwords onto third-party platform. Can you
just elaborate how that works?
Mr. Rubinstein. Yes, Congressman, thank you. It is not only
our company. The industry is moving in this direction. So data
sharing has been going on since the mid 1990's. The
cybersecurity environment, as we all know, has changed
dramatically. So what we are doing is we are working with
fintechs, with aggregators, and with banks and brokerage firms,
platform providers, the core providers that Mr. Price
referenced, in ways for consumers to actually affirmatively
instruct their institutions.
So basically log into their institution and say yes, please
share my data with this third party. So they go through the
authentication not with the fintech, but they go through it
with their institution. What that does is that permits their
institution, one, to set up a secure connection; two, to help
the consumer monitor that on an ongoing basis so the consumer
doesn't use an app and forget, meanwhile the data is still
being harvested; and third, it provides a way for the consumer
to go to the institution and say, I don't want to use it
anymore, and revoke that consent.
Mr. Loudermilk. OK. Thank you. This is the type of
innovative thinking that is very beneficial to the industry.
Mr. Chairman, thank you for the time and I yield back.
Chairman Luetkemeyer. The gentleman's time has expired.
Now we go to the gentleman from Colorado. Mr. Tipton is
recognized for 5 minutes.
Mr. Tipton. Thank you, Mr. Chairman. I apologize. I was
running late. I had another meeting to be able to be at.
But, Mr. Harrison, I wanted to address you maybe first. I
represent rural Colorado. I have a lot of small communities, a
lot of underbanked communities and a lot of innovations. To
make sure that we have a fair and level playing field for these
rural communities and the underbanked to be able to participate
is incredibly important for us.
Can you maybe expand for me at least how your business--why
you deal with the banks and how this is going to be benefiting
some of these rural communities, why that is important?
Mr. Harrison. Sure. Thank you for the question, Congressman
Tipton. Again, I believe that our partnerships with banks give
us a better insight to what consumers actually need. I think
that banks have attempted to serve their customers in a way
that we are just evolving to really understand. Although I will
say that we take a very customer-centric approach to the design
of all our products, where we start with what has the customer
actually asked you for and how do we best anticipate their
needs in the future so that we are not just a part of an
immediate need, but also what is the life cycle of that
financial life after we go through that. So we will work with
our bank partners to actually create these products and then
also help to enable them as their service provider.
Mr. Tipton. One of the issues I really hear, Mr. Harrison,
at home from a lot of our small community banks in particular
is they would like to be able to do something, but regulatorily
they are inhibited from doing something.
Are there any regulations maybe that you can point to that
are inhibiting you from being able to work with some of these
small community banks?
Mr. Harrison. I think true lender. The true lender rule I
think is the one inhibitor that would help us to provide some
clarity and establish the bank as the true lender. We are
absolutely ready to engage in any dialog that is necessary in
order to clarify what that truly looks like from a practical
business perspective.
I think that a model that Elevate has actually established
with our banking partners is one that actually we can use as a
proxy to better inform and refine that for the entire industry.
Mr. Tipton. I have the Treasury report. Is there anything
in particular that you could maybe point to that might be able
to help Elevate or any other companies to be able to reach out?
Mr. Harrison. I am not as familiar with the Treasury report
as that is more recent to me, but I would be happy to go back
and look at that and get back to you on that for sure.
Mr. Tipton. Great. Thank you so much, I appreciate that.
Mr. Rubinstein, great to see another Rubinstein up here and
glad to have you here. Can you maybe detail briefly what work
and benefits that you've been working on have yielded really to
our consumers?
Mr. Rubinstein. Congressman, thank you for that question.
The work we are doing is really to protect consumers. We have
30 million consumers, $7.3 trillion in assets that we need to
protect. So it is all about protecting consumers from insider
threats, from individual hackers, and from nation-state
attacks. It is not only protecting them when they are at
Fidelity, but it is helping to protect them when they decide to
use some other service where they connect their Fidelity
account or in the larger world connect any institutional
account.
So we believe that we are trying to move to a space where
consumers understand how their data is being used when they
share it, that they are able to monitor that on an ongoing
basis and able to revoke that consent.
I've given a few talks on this topic. I also often ask
people, do you use this personal finance app? Some people say,
yes, I used to use it. So I said, well, what did you do to stop
using it? The number one answer is, I stopped using it; and the
number two answer is, I deleted the app from my phone. Neither
one of those two things actually stops the harvesting of
consumer data every day.
If we can change the way consumers authenticate and the way
they control that flow, we can put the control back in the
hands of the consumer so they know how their data is being used
and they can revoke that consent at any time.
Mr. Tipton. What exactly can consumers do? That would be my
response; I just delete the app. But--
Mr. Rubinstein. So today consumers have to remember all the
different apps that they use, then go into those apps and
actually request for it to be deleted and request for their
data harvesting to stop. They could change their password on
all their financial institution sites. That is a hardship and
then people don't remember the new password, or we could just
flip the model upside-down so that they can get a dashboard at
their financial institution, whether at their bank, their
brokerage firm or wherever, where they can have that dashboard,
see what is going on, and be able to push a button and revoke
access.
Mr. Tipton. Great. Thanks so much.
Mr. Chairman, my time has expired.
Chairman Luetkemeyer. The gentleman's time has expired.
With that, we go to the gentleman from North Carolina. Mr.
Pittenger is recognized for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman. I appreciate it.
Thank each of you for being here with us today.
Mr. Cutler, regarding data sharing, as it plays a major
role on the international stage, are there international
standards or procedures that you would recommend or drawbacks
that you would see relative to what can be done in our own U.S.
financial system?
Mr. Cutler. Absolutely, sir. In my written testimony, I
reference several times the U.K. and their standards. I think
we should look to what the U.K. is doing in the Financial
Conduct Authority, FCA, as a good model for what we should look
to. I think in the Treasury report they point to that model
several times. So I think we should look there.
Mr. Tipton. Thank you. The Treasury report calls for
greater harmonization among State regulators for licensing
requirements. To that end, since many fintech companies are
subject to these State regulators, are varying licensing
requirements between States impacting the ability of fintech
companies to provide new product innovation?
Mr. Cutler. I think that, Congressman, that is a great
question. I think there needs to be more State harmonization.
It is a real hindrance right now. It is an expense for fintech
companies to apply for these State licenses that are very
similar but also different.
So they have to go through the process. They have to apply.
They have to pay the fees. It is very time-intensive, resource-
intensive. If there was a streamlined process, it would save a
lot of resources.
Mr. Tipton. Thank you. So, Mr. Price, your testimony
discusses the importance of partnerships between the banks and
the tech companies. To that end, does the current regulatory
scheme hurt banking innovation?
Mr. Price. I think to the extent that there is not a level
playing field, it does. I will just give you one example in
payments. If you are a fintech, if you are Square, you can put
in a touchpad and you can get into your account. If you are a
bank, you can't do that. So that is just one example. So the
playing field is not level between banks and fintech companies.
Mr. Tipton. To that end, what change would you recommend to
encourage innovation?
Mr. Price. I think a level playing field between banks and
fintech companies. If you are in the banking business, you have
regulatory oversight, CRA, HMDA, Fair Lending. If those
regulations need to be modified or changed, we can do that. But
it should be the same for anybody who makes a loan or takes a
deposit.
Mr. Tipton. Thank you. To each of you, I would ask,
cybersecurity, of course, is one of the most important issues
facing companies of all kinds, especially in the wake of the
Equifax breach. What steps do banks take to protect personally
identifiable information, private and financial data? Who would
like to answer that?
Mr. Price. We have, as I mentioned earlier, FFIEC guidance,
which is regulatory guidance. We do everything from tabletop
exercises, ethical hacking, phishing exercises. Our enterprise
risk culture around this is evolving constantly. We get
regulated on it every year by the State, Federal Reserve, and
the FDIC. That is incredibly important to us.
Mr. Tipton. Thank you. Mr. Rubinstein, did you want to say
something?
Mr. Rubinstein. Congressman, this is an area of extreme
concern for us. It is the number one thing we focus on. As a
large institution, we have over 700 people who are focused
specifically on cybersecurity.
We get attacks just about every day. We fend those off. It
is an ever-escalating battle of firms like ours employing new
tools because the bad guys are employing new tools. One of the
reasons we are so passionate about data aggregation and
changing the model is we often find criminals take user IDs and
passwords that they find on other sites.
So yes, we have all heard about big hacks that have
happened at low-risk sites. They take those credentials, they
go open an account at a fintech impersonating that customer.
They use those, log into a bank or a brokerage firm. They find
valid ones, and then they use those as a means to attack. So we
have to defend against that as well. It is an ever-escalating
battle that we are extremely focused on.
Mr. Tipton. Thank you. My time has expired.
Chairman Luetkemeyer. We have a couple of follow up
questions here for some members, so we will start with Mr. Barr
for a second round. Thank you.
Mr. Barr. Yes, thank you, Mr. Chairman, for the follow up.
Mr. Cutler and Mr. Harrison, you heard my question and Mr.
Astrada's answer and his defense of the State-by-State
regulatory model here and the applicability of State usury
laws.
Mr. Cutler specifically, to give you an opportunity to
maybe respond to that, given your testimony here today in
defense of a clarification of true lender and valid-when-made
doctrine, and I just invite you to respond to his testimony if
there is a counterpoint.
Mr. Cutler. Thank you, Congressman Barr. In my opinion, a
handful of court decisions have wrongly called into question
whether the bank is the true lender in a bank-fintech company
partnership. These court decisions are based on a predominant
economic interest test that is subjective and that can be cited
to conclude that the fintech company is the true lender in
these circumstances. Whether the bank or fintech company is the
true lender may be the difference in determining whether a loan
is void or uncollectible.
I think personally that the uncertainty is having a
chilling effect on innovation here. So I think it is important
to address this uncertainty, and I think the legislation that
has been passed has been helpful and it will be important to go
forward on that and get signed into public law.
Mr. Barr. What would be the argument to restrict the
transferability of loans? What is the argument in favor of
that?
Mr. Cutler. I don't see it. When I first started my career,
I was in the securitization business. When we were in that
business, it is clear that the rights in the loan followed when
you transfer it. So it doesn't make sense to me.
Mr. Barr. Mr. Harrison, can you chime in on this issue?
Mr. Harrison. Yes, absolutely. I support Mr. Cutler's
responses. I believe that support for clarification on true
lender and also support on valid when made is substantiated.
I don't believe that there is any intent from the fintech
world, to harm our customers in any way in particular. I think
that, again, we will abide by regulations as our banking
partnerships dictate, and we will continue to try to do
everything that we can to protect our customers.
Mr. Barr. If Congress does not clarify this issue, tell me
about the impact on innovation. What will be the impact on
innovation if there continues to be this uncertainty in the
legal world on the transferability of loans?
Mr. Harrison. As much success as a company like mine,
Elevate has had, there are still 160 million Americans that
have credit scores that are below 700. We have been able to
serve a couple million of those, so we are only really
scratching the surface.
The reality is that these bank partnerships with fintech
can help us to enable another multiple of us being able to
reach out to those customers and be able to understand what
needs do they actually have so that we can design better and
safer products for them in the future.
Mr. Barr. In States where, in rural America, like my
district, where you don't have access to fintech and you don't
have access maybe, and if bank-fintech relationships are not
allowed to flourish, what does that mean? Does it mean more
bankruptcies? Does it mean more overdrafts? What is the impact
on those underserved borrowers?
Mr. Harrison. Yes, I think it does from a macro level. But
from a micro level, we look at the impact to the customers
every day. We have customers that don't have the money that
they need for medical expenses. They don't have the needs that
they have for home repairs, for car repairs. These customers
that are in these rural areas, not only do they not have access
to banking institutions sometimes, but they also don't have
immediate access to food or to just basic needs that they have
in order to continue their life.
So having that outreach and enabling them and giving them
the resources that they need to maintain their lifestyle is a
huge impact from a practical perspective.
Mr. Barr. I really appreciate all the testimony today. I
think fintech is a huge opportunity for American consumers,
particularly underbanked consumers, people who live in
economically distressed places, and rural America.
And I think Congress does need to start getting serious
about creating a legal landscape that allows these
relationships to flourish so that underserved populations can
have access to these very innovative products.
Thank you, and I yield back.
Chairman Luetkemeyer. The gentleman yields back.
I have just a couple of follow ups, Mr. Astrada.
Mr. Astrada. Can I just request 30 seconds to answer the
Congressman's question of why you would restrict it? I just
think it is just really core to this.
Mr. Barr. Sure.
Mr. Astrada. I don't want to restate the point, but I think
one of the best reasons to restrict the transfer of loans is
when the very model itself has been hijacked by unscrupulous
lenders. And I know we can talk about intent, but if you look
at page 6 of my testimony, it is not about intent or
subjectivity. Like, the default rate on the securitization of
marketplace loans has skyrocketed in the last year and a half.
So whether there is an intent to harm or not, the consumers
are bearing the risk of those failed loans, and marketplace
lenders are able to pass it off on the secondary market. And
there are the cases that some of these marketplace lenders,
really big ones, some that you hear from every day, their
defaults are in the double digits. Their default rates are
close to 50. They are underwriting, they are passing the risk
for failure to the consumer and the cost to the investor.
So that is why we are so adamant about restricting the
transfer of loans in this model. Thank you for the extra time.
Chairman Luetkemeyer. I have a couple of follow up
questions. Mr. Rubinstein, you have talked a lot about the
control of data. And I would just like to get on record who
actually owns the data? Do you own the data? Does the consumer
own the data? Whenever they give control to you by signing it
away, have they given up control of it? Give us exactly where
this all sets so we know, because we have to build on that very
premise and that information to be able to understand what we
are doing here.
Mr. Rubinstein. Congressman, we come from the very
straightforward place that the consumer should be able to share
that data as they see fit.
Chairman Luetkemeyer. Is there something in law? Is there a
legal basis for the consumer owning his data somewhere?
Mr. Rubinstein. I am not a lawyer so I apologize. I
actually don't know if there is a basis in law. But we take the
perspective that the consumer should have access. And I think
Section 1033 of Dodd-Frank calls for the consumer to have even
electronic access. We do think the consumer should have access
as well as be able to use that data in a safe, secure, and
transparent way when they want to use it.
So if they want to use it with a lending application or if
they want to use it with a budgeting application or anything
else, they should have that ability, but they should also know
what they are getting into. That data should be used at the
other side for the purpose the consumer thought it was. If they
think they are using a budgeting app, they should get a
budgeting app. It shouldn't be that it is a Trojan horse for
the gathering, accumulating, and reselling of that data.
Perhaps if the consumer wants to permit it for that purpose,
the consumer should be able to permit it for that purpose, but
they should know that is happening.
We think that burying something on page 35 of a privacy
policy doesn't help the consumer understand how that is being
used, and we need to see more explicit consent from the
consumer for how that data is used and, again, give them the
right to revoke that consent at any time.
Chairman Luetkemeyer. Very good.
Mr. Cutler, one of the concerns I have is that with fintech
companies, a lot of them are startups, a lot of them are pretty
thinly capitalized, and to me there would seem to be a risk
there from the standpoint that if the economy turns down or
there is a bump in the road or their business model isn't quite
right that something can happen.
Would you agree with that? Is there a risk there? Are they
all in good shape? To me, for the fintech guys to partner with
the financial institution at some point would seem to be a good
idea from the standpoint of securitizing their future there
with some balance sheet strength. Would you like to comment?
Mr. Cutler. Thank you, Mr. Chairman, for the question. I
think both options are great. I think partnerships with the big
banks and all banks and community banks should be encouraged,
and those can be very beneficial. But I think we also want to
encourage folks with an idea in a garage to start a new
business, and if it has little capital but a great idea, we
should do everything in our power to give them the tools to
succeed.
Chairman Luetkemeyer. Mr. Harrison, I think you mentioned
that 700 seems to be a magic number for the credit score or for
folks that you want to deal with. I saw an article in the paper
this week that the new average for people in this country is
now I think 704, 706, somewhere in that neighborhood.
Mr. Harrison. Yes, sir.
Chairman Luetkemeyer. So if that is the average credit
score, which is the highest in history, that means half the
people in this country couldn't qualify for stuff that you are
talking about. Is that right?
Mr. Harrison. That is exactly right. A little bit over half
of the population of the U.S. today does not qualify for
mainstream products. And that is another reason why outreach to
some of the community banks and being able to help them to
design products that are safe and secure for their constituency
is really important.
We want to be able to design even more products. We want to
be able to leverage the fact that community banks and also just
banking institutions in general have a lower cost of capital,
which is really a lot of their prowess and their understanding
of the regulations and their oversight, help us to make sure
that we are doing this in a safe and secure manner.
So we will absolutely continue to pursue these partnerships
with banking institutions, because we believe it is the right
balance that we can have from the best of both worlds.
Chairman Luetkemeyer. Mr. Price, would you like to comment
on that?
Mr. Price. I think the challenge as we have tried to forge
these partnerships initially was whose customer is it? And if
it is our customer and we have the checking account, the debit
account, the credit card, small business loan, and we are doing
an alternative lending product, we think it is our customer.
And that has been the flash point.
And, quite frankly, I think we will forge through that over
the next half decade or so, and we will get to something we can
both live with, their business model and ours. That is helpful.
Mr. Harrison. And I agree with Mr. Price. It is the bank's
customer for sure.
Chairman Luetkemeyer. Very good. Thank all of you today for
your fantastic testimony. I feel like the Maytag repairman
here, the loneliest man in town. So it is probably time to go
home. So, again, thank you for your testimony.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
And, with that, this hearing is adjourned.
[Whereupon, at 10:34 a.m., the subcommittee was adjourned.]
A P P E N D I X
September 28, 2018
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