House Financial Services Chairman Patrick McHenry Reintroduces Financial Services Innovation Act to Establish Regulatory “Sandboxes”

Last week, House Financial Services Chairman Patrick McHenry reintroduced the Financial Services Innovation Act, legislation that would “ensure the United States continues to lead the world in financial innovation,” according to a press release from the Financial Services Committee. It does this by establishing regulatory “sandboxes” that allow entrepreneurs to test new products and services without sacrificing critical consumer protections.

“Technology has radically changed how consumers interact with the financial system, as well as how financial institutions interact with regulators,” said McHenry. “Budding fintech firms currently operate in fear of heavy-handed penalties brought down by regulators that have failed to work with Congress to provide clear rules of the road.”

“That’s why I’m reintroducing the Financial Services Innovation Act,” McHenry continued, adding that “this commonsense legislation will give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market.”

If the legislation is adopted and becomes law, it will require federal regulators to create Financial Services Innovation Offices (FSIOs) within their agencies to foster innovation. With these offices in place, companies can then apply for an “enforceable compliance agreement” that would allow them to provide innovative products and services under an alternative compliance plan.

“Innovators have long flocked to American markets because we strike the right balance between fostering innovation and consumer protection,” McHenry said. “This bill will help ensure the United States continues to lead the world in financial innovation.”