We interrupt the usual conversation of Common Sense Compliance by Lucy Griffin and Nancy Derr-Castiglione with some common sense from a guest blogger.
Earlier this year the Comptroller’s Office published a white paper on financial innovation—Supporting Responsible Innovation In The Federal Banking System: An OCC Perspective—with the emphasis on financial technology. OCC requested comments from the public, in advance of its recent forum on financial technology.
As we were reviewing the comments for a roundup article next week, we were struck by a letter from Richard Riese, of SMAART.Consulting. Riese retired last year after 11 years at the American Bankers Association, where he most recently served as senior vice-president and head of the association’s Center for Regulatory Compliance. Previously Riese was assistant chief counsel for enforcement at the Office of Thrift Supervision.
Riese’s letter made a point regarding compliance in fintech being a two-way street. The consumer, he says, has some responsibility here—it’s not just on the bank. Here is an excerpt from his letter.
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The responsibility of producers of innovative financial products and services is only half of the equation necessary for attaining a sustainable market for responsible innovation. There must also be responsible conduct on the part of those that demand and use those innovations to address their wants and objectives.
Such personal or organizational responsibility for appropriate use of innovation should be no less true in the financial market than it is in the rest of the economy. Yet the discussion of responsible innovation reflected in the white paper is bereft of this side of the equation.
No more apt example of this duality of responsible conduct is more readily available than that of the personal smartphone.
As a talisman of empowering innovation, the cell phone/smart phone has few equals. It has revolutionized communication and already has delivered financial innovation in business and consumer markets. But the legitimacy of imposing standards of responsible conduct on consumer use of their mobile devices is unassailable—as numerous state and local laws restrict the personal use of mobile phones for voice, text, or app activity that contribute to distracted driving.
If the Federal Communications Commission had imposed on the phone manufacturers the production of failsafe capabilities on the first cell phones imagine the delay in the introduction of this technology.
Responsible use was an accepted predicate to mobile communication innovation. As technology and individual preferences continue to evolve, fault tolerant features can be introduced, but there will always be a line drawn that assigns personal responsibility to the user of innovation.
Similarly, customer use of financial innovation entails the insistence on responsible conduct by the user. Whether it is the safeguarding of debit card PIN numbers or the simple balancing of one’s checkbook, consumers must be responsible for the consequences of their handling of reasonably safe and sound financial products.
There is nothing revolutionary about this requirement.
Indeed, if anything, it has become even more imperative with the evolution of information technology.
Accordingly, the principle of provider responsibility must be accompanied by a parallel principle of consumer responsibility if the OCC’s perspectives are to be an effective foundation for regulatory policy on supporting responsible innovation.