AFC Demands OCC Clarify Risk-Based Standards for Fintech Supervisory Violations

The American Fintech Council (AFC) has formally challenged the Office of the Comptroller of the Currency (OCC) to refine its proposed rule on regulatory violations. For fintech professionals and partner banks, this push for "materiality" over "technicality" is critical to preventing minor administrative errors from triggering disproportionate supervisory actions that could stall innovation or damage reputations.

What was announced

On October 1, 2026, in Washington, D.C., the AFC submitted a detailed comment letter responding to the OCC’s proposed rule regarding violations of laws or regulations. The council’s primary objective is to ensure that federal examiners focus their heightened supervisory attention on issues that present genuine legal, financial, or customer risk, rather than minor administrative errors. The AFC supports the OCC’s effort to establish a clear framework but recommends specific refinements to ensure proportionality in the supervisory process.

The AFC’s recommendations center on several key pillars of regulatory reform. First, the council argues that any "substantive" classification of a violation must be grounded in demonstrable materiality. This would prevent non-consequential errors from being categorized alongside systemic failures. Furthermore, the AFC suggests that findings involving patterns or systemic issues should only be validated if supported by evidence of a meaningful and recurring deficiency. To maintain consistency across the sector, the AFC recommends preserving the "banking or banking-related" limitation in the OCC’s scope. The council also proposed that the OCC apply institution-specific factors when assessing materiality, ensuring that the standard remains flexible enough to account for different business models without creating disparate substantive standards. Finally, the letter calls for a clear written basis for any substantive violation classification and the establishment of a formal supervisory review process for institutions that wish to dispute a classification.

"A violation should be treated as substantive when, viewed in context, it has produced or could reasonably be expected to produce a material consequence for the institution, its customers, or the integrity of its financial records,"

Ian P. Moloney, Chief Policy Officer of the American Fintech Council.

The companies involved

The American Fintech Council (AFC) is a standards-based trade association representing approximately 175 member companies and partners. As a major industry body, the AFC bridges the gap between traditional innovative banks and the broader fintech sector. Its membership is diverse, comprising firms that focus on consumer finance competition and products designed for underserved geographies. The council’s mission is centered on promoting a transparent and customer-centric financial system through responsible innovation and sound public policy.

The Office of the Comptroller of the Currency (OCC) serves as the primary federal regulator for national banks and federal savings associations. As an independent bureau of the U.S. Department of the Treasury, the OCC is responsible for ensuring that national banks operate in a safe and sound manner, provide fair access to financial services, and comply with applicable laws. The agency has become a focal point for the fintech industry as more digital-first entities seek national bank charters or establish complex bank-fintech partnerships that fall under the OCC’s supervisory umbrella. FF News has tracked the agency's activities across 14 previous reports, highlighting its central role in the American financial regulatory landscape.

What FF News has reported before

FF News has closely tracked the evolving relationship between federal regulators and the fintech sector. In September 2026, we reported that the OCC Overhauls Bank Supervision Policies to Focus on Material Financial Risks, a move that set the stage for the current debate over materiality standards. This regulatory shift is particularly relevant for major industry players; for instance, Revolut Secures Conditional OCC Approval for U.S. National Bank Charter recently, highlighting the agency's role in gatekeeping the American market. Additionally, the trend of neobanks seeking formal banking status was further evidenced when Chime to Acquire Stride Bank for $590M: Neobank Giant Secures National Charter, placing more fintech-driven operations under the OCC's direct oversight. We also noted broader shifts in the banking landscape, such as when American Savings Bank Files for IPO: Hawaii-Based Lender Targets NYSE Listing Under Symbol ASBH.

What this means

This announcement signals a growing industry pushback against "regulation by enforcement." For fintech professionals, the AFC’s stance highlights a critical friction point: the speed of technological innovation versus the rigidity of traditional bank supervision. If the OCC adopts a strict materiality standard, it could significantly reduce the compliance burden on innovative banks, allowing them to iterate faster without the fear of minor technicalities triggering severe enforcement actions. However, the industry remains under pressure to prove that proportionality does not lead to permissiveness. The outcome of this rule-making will likely determine how aggressively the next wave of neobanks pursues national charters and how existing bank-fintech partnerships manage their compliance frameworks.