Lansing, Michigan – The race to turn technology companies into federally chartered banks is accelerating. Michigan Attorney General Dana Nessel says regulators should not let speed, innovation or cryptocurrency hype push consumer protections aside.
Her warning centers on a basic question: Should companies accused of predatory lending or risky financial conduct receive the same national privileges, and public credibility, as traditional banks?
Nessel joined a coalition of 20 attorneys general in urging federal regulators to reject banking applications from financial technology companies with records of excessive risk, high-cost lending or practices that violate state laws. The coalition submitted its concerns in a letter to leaders of the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve Board.
According to the attorneys general, the number of fintech companies seeking national banking charters has risen dramatically during the past year. Applicants include cryptocurrency businesses, peer-to-peer payment services and other financial platforms seeking access to the national banking system.
“Evading state laws by securing a national charter to exploit borrowers and strip Michiganders of crucial consumer protections is unacceptable,” Nessel said.
“Residents must be safeguarded from bad actors, and any institution with a history of predatory lending must have their applications denied.”
The coalition argues that a national charter could allow certain companies to avoid state interest-rate caps and other consumer safeguards. The attorneys general also warned that fintech businesses could use the word “bank” to build public trust while avoiding responsibilities commonly associated with traditional institutions, including community reinvestment obligations and strong compliance systems.
The concerns extend beyond individual borrowers. The letter warns that cryptocurrency issuers and companies offering high-risk products could expand to enormous scale, potentially reaching trillions of dollars. Giving such businesses national banking privileges without safeguards comparable to those imposed on conventional banks could create broader risks for the financial system, the coalition said.
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The attorneys general are asking regulators to deny national bank charters, bank holding company applications, mergers, acquisitions, deposit insurance and related privileges to companies with histories of predatory or excessively risky conduct.
Nessel was joined by attorneys general representing Arizona, California, Colorado, Connecticut, the District of Columbia, Hawaiʻi, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington.