The American Fintech Council, the industry association representing fintechs and banks, is urging the Federal Deposit Insurance Corporation (FDIC) to withdraw its proposed rulemaking on brokered deposits.
According to the American Fintech Council (AFC), the FDIC’s proposed brokered deposits rule raises significant concerns due to its departure from recently established regulations and its likelihood to harm consumers, stifle competition, and undermine financial innovation. AFC also suggests that the proposed rule includes a flawed analysis of deposit stability, and fails to address the causes of recent bank failures.
“The FDIC’s proposed rule threatens to undo years of progress in creating a more inclusive, innovative, and consumer-centered financial system,” explains Phil Goldfeder, CEO of AFC. “This proposal would not only harm underserved communities, but also weaken the resilience of the financial services industry. AFC is committed to advocating for sound, evidence-based regulation that promotes responsible innovation and supports all consumers.”
AFC’s recommendations underscore the importance of fostering responsible innovation and ensuring a regulatory framework that supports financial inclusion and stability.
Contrary to the FDIC’s assertions, AFC explains that deposits obtained through bank-fintech partnerships are stable and well-documented. They serve as primary checking and savings accounts for consumers who use them for everyday banking needs, such as payroll deposits and debit card transactions, rather than rate-shopping.
AFC also emphasises that deposits originating from bank-fintech partnerships function similarly to core deposits at traditional financial institutions, offering no increased risk to the resilience of the financial institution or the Deposit Insurance Fund.
Time for a U-turn?
AFC also raises concerns about the potential market and consumer harm the proposed rule poses. Redefining brokered deposits and eliminating exemptions could undermine competition and innovation in the financial services industry.
This could disproportionately harm historically underserved communities that benefit from the affordable and accessible financial products offered through responsible bank-fintech partnerships. Without these partnerships, consumers may face increased fees and reduced access to financial services, driving them toward unregulated and potentially predatory alternatives.
“The technological competition that has been a hallmark of bank-fintech partnerships and helped to create a more inclusive financial services industry would be severely stymied if the proposed rule is finalised,” said Ian P. Moloney, SVP and head of policy and regulatory affairs at AFC. “Without the competition and innovation provided in the current market, both community banks and the overarching financial services industry are less able to serve their customers effectively, particularly those who have been historically unbanked or underbanked.”
As a result, AFC is urging the FDIC to withdraw the proposed rule, which overlooks critical issues, such as the role of social media in deposit volatility, and instead imposes unwarranted burdens on innovative financial institutions and their fintech partners.
The post American Fintech Council Urges FDIC to Withdraw Proposed Rule on Brokered Deposits appeared first on The Fintech Times.
