Bank-fintech partnerships are good for consumers and banks, as I recently explained in testimony to Congress during a hearing on the opportunities and challenges in the fintech marketplace.

Consumers benefit because banks are able to use fintech to deliver safer, more transparent, lower cost and more convenient financial products and services to consumers over the Internet and mobile devices.

Leveraging big data and technology, fintech companies have also been able to offer banks around the country the infrastructure to serve and welcome more people into the financial system. For instance, fintech companies can provide access to a broader range of data and analytics, potentially helping banks to provide more consumer loans responsibly. Richard Cordray, the former Director of the Consumer Finance Protection Bureau (CFPB), noted how “alternative data from unconventional sources may help consumers who are stuck outside the system build a credit history to access mainstream credit sources.”

Moreover, the federal banking agencies supervise banks and their service providers to ensure that activities that occur outside of the bank are examined to the same extent as if they were being conducted by the bank itself, thereby protecting consumers and the financial system. Bank-sponsored lending programs with fintech firms are no exception, and the FDIC has published detailed guidance as to how these relationships should be managed and supervised.

New and inconsistent court decisions, however, threaten to undermine bank partnerships with fintech providers and jeopardize the ability of community banks to expand access to credit. Legislative inaction creates uncertainty that can stifle innovation, and leave millions of people with even fewer credit options, pushing them to the fringes of the economy in order to make ends meet.

Thankfully, Congress has already taken an important bipartisan first step towards closing the regulatory hole courts have left on this key issue. Co-sponsored by Representatives Trey Hollingsworth (R-IN), Alcee Hastings (D-FL), Blaine Luetkemeyer (R-MO), and Henry Cuellar (D-TX), the Modernizing Borrower Credit Opportunities Act of 2017, clarifies that banks, as the loan originators, are the “true lenders,” enabling these partnerships to continue helping credit-constrained consumers around the country find responsible credit offered and underwritten by a federally supervised bank.

This article was originally published in The Hill newspaper.

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Andrew Smith

Andrew Smith advises clients on retail financial services, data protection, advertising and consumer protection, technology, credit reporting, and e-commerce issues. He assists banks, non-bank lenders, technology companies, and their vendors with regulatory compliance, litigation, and transactional matters.

Prior to re-joining the firm, Andrew…

Andrew Smith advises clients on retail financial services, data protection, advertising and consumer protection, technology, credit reporting, and e-commerce issues. He assists banks, non-bank lenders, technology companies, and their vendors with regulatory compliance, litigation, and transactional matters.

Prior to re-joining the firm, Andrew served as Director of the Bureau of Consumer Protection at the Federal Trade Commission (FTC), where he was focused on investigations and enforcement of privacy, data security, financial services, and marketing laws and regulations across a broad range of areas, including fair lending, technology platforms, digital advertising, payments, telemarketing, lead generation, affiliate marketing, consumer reporting, and small business financing. He also oversaw the Bureau’s extensive rulemaking and workshop proceedings, including on endorsement guides, security of financial data, subscription marketing, contact lenses, and children’s privacy. Additionally, he led the FTC’s COVID-19 pandemic-related enforcement and consumer education efforts. In a previous role as Assistant to the Director of the Bureau of Consumer Protection at the FTC, Andrew led a team of professionals to develop and draft ten rules and six studies under the Fair Credit Reporting Act.

Andrew represents clients before federal and state agencies—particularly the FTC and Consumer Financial Protection Bureau (CFPB)—in law enforcement and rulemaking proceedings. He regularly advises companies on the requirements of the GLBA, FCRA, DPPA, ECOA, FDCPA, TCPA and TSR, FTC Act, Dodd-Frank Act, and analogous state laws, including state insurance privacy laws and security breach notification requirements.