Maria Vullo, the head of the New York State Department of Financial Services, is a skeptic of the so-called fintech revolution.

While some policymakers are eager to accommodate online lenders with regulatory oversight that is looser than what applies to banks, Vullo believes the word “fintech” is misleading and too often used as cover by predatory actors.

“We’re regulating the institutions; we’re not regulating the technology,” Vullo said in a recent interview at her New York office. “What these entities want to do is they want to say, ‘We don’t have to comply with New York law; we can charge whatever interest rate we want.’ Well, do it in a state that allows it. New York doesn’t allow that.”

Maria Vullo, head of the New York Department of Financial Services.
New York State Superintendent Maria Vullo said technology-driven financial providers must be regulated just like everyone else is. “What these entities want to do is they want to say, ‘We don’t have to comply with New York law; we can charge whatever interest rate we want.’"

Vullo’s skepticism is reflected in her agency’s actions to date. Since taking office in early 2016, Vullo backed a Conference of State Bank Supervisors lawsuit against the Office of the Comptroller of the Currency’s proposed special charter for fintech firms and filed a separate lawsuit of her own against the agency.

“The OCC is trying to preempt state laws,” she said, suggesting that she worries not just about the fintech charter itself, but about the possible start of a slippery slope. “We happen to have really strong laws in New York, and we have all these institutions, with billions of dollars in assets. The amount of fees that New York would lose if this thing happened!”

Fintechs at the gate

To some, Vullo is a tough cop on the beat, a worthy successor to Benjamin Lawsky, who earned a reputation as a scourge of Wall Street. To others, Vullo’s actions threaten to cause fintech firms to flee New York, leaving the country’s financial capital out of a movement that promises significant innovations.

After a few months in office, Vullo issued subpoenas against LendingClub and nearly 30 other marketplace lenders to determine whether they should be licensed in New York. Her agency is now attempting to expand licensing requirements for all small-dollar consumer and commercial lenders, regardless of the interest rates they charge. (Currently, these lenders only have to register if their interest rates exceed 16%.)

The move has drawn fire from the fintech sector. “What the department is doing under her leadership is essentially attempting to force standards on the entire country based on the fact that New York is such a large, important state, without regard for the economic consequences of the rules that they’re adopting,” said Scott Pearson, a partner at Ballard Spahr who advises banks and fintech firms.

Critics warn that this environment might prompt fintech players to leave New York, especially marketplace lenders already smarting from a recent appeals court decision that could force them to comply with the interest rate caps for each state where they operate.

“One of the questions is whether or not the amount of regulatory overreach is going to rise to the level where state financial institutions will convert to a federal charter in order to avoid the regulatory burden,” said Joseph Lynyak III, a partner at Dorsey.

Joseph Lynyak of Dorsey
“One of the questions is whether or not the amount of regulatory overreach is going to rise to the level where state financial institutions will convert to a federal charter in order to avoid the regulatory burden,” said Joseph Lynyak III of Dorsey.

Some fintech industry players see Vullo as difficult to work with. They contend that her office doesn’t seem to want their feedback, even though they are interested in establishing a dialogue.

“She’s very hard to reach,” said one fintech lobbyist who spoke on condition of anonymity. “The fintech companies, we’re mostly open about a lot of this stuff, and I can’t think of anyone that’s had a voluntary conversation with her.”

But Vullo is unapologetic about her stance and her willingness to strike out on her own.

“My job is to protect our markets in New York, our industry in New York and our people in New York from predatory conduct,” she said.

It’s an issue that Vullo, a Brooklyn native raised by second-generation Italian-Americans, takes personally.

“You can tell that this gets at me. Because, you know, I grew up in a lower middle-class community,” said Vullo. “Italians are not generally people that put up with discrimination. ... ’cause we’ve been discriminated against.”

Despite modest roots compared with many of her peers among the New York white-collar elite, she rose rapidly through the ranks, propelled by her outspokenness and ability to quickly absorb complex topics.

After attending an all-girls high school in Brooklyn, Vullo went on to study at the College of Mount Saint Vincent, a Catholic liberal arts college located a stone’s throw from Yonkers, and obtain her J.D. from New York University School of Law.

But Vullo’s own parents had no higher education degrees. Her father sewed fur coats in a factory, and her mother was a bookkeeper and homemaker, busy raising three girls and two boys.

Vullo recalled running for class president in sixth grade. “I lost by one vote,” she said. “To a boy.”

The memory still stings, but Vullo said her parents instilled in her a self-assurance that would help her make it through 27 years at the prestigious law firm Paul, Weiss, Rifkind, Wharton & Garrison, and ultimately take the helm of New York’s financial services regulatory agency.

“My mother, in particular, encouraged her daughters to stand up for themselves,” said Vullo, a parent to two adopted children. “It probably helped me in my profession and in the business world, where stereotypes of what leaders should be are male models.”

In her stance on the OCC fintech charter, Vullo has backers among consumer advocates, who worry that the charter could allow predatory actors to reach more consumers by avoiding state consumer protection laws.

“New York has been a strong state in looking out for consumers and defending its interest rate caps,” said Lauren Saunders, the associate director at the National Consumer Law Center. “States are really important players in protecting consumers, especially when it comes to loans, when we don’t have interest rate caps for the most part at the federal level.”

The cyber threat

Vullo wants to preserve her agency’s reputation as a tough financial regulator. If that means upstaging the federal regulators, so be it.

Fintech isn’t the only area where Vullo has blazed her own path. Under her leadership, New York’s Department of Financial Services has imposed tough new cybersecurity requirements — an initiative begun under her predecessor, Lawsky — and backed a measure that would give the department the power to ban “bad actors” from the state’s financial industry.

“This agency is situated in the financial capital of the world, and regulates the financial services industry in New York and is a leader in doing that,” said Vullo, “while at the same time protecting consumers in their health care and their financial services products.”

The industry has complained that New York is setting standards too high, and that those rules conflict with what federal regulators have required. But Vullo has suggested federal regulators should follow her agency’s lead.

“I thought it was important to set rules of the road in order to bring institutions up to a certain level of protection, and to ensure that the institutions at senior levels are focusing on cybersecurity,” said Vullo. “I can’t speak for other regulators and what their processes are.”

Though the final rule still carries a hefty price tag, some in the financial industry acknowledge it could have been worse.

“There was a very healthy give-and-take,” said Michael Smith, the head of the New York Bankers Association. “But the process went forward as it should have.”

Even being a relative newcomer on the regulatory stage, Vullo is no stranger to the financial services industry. As an attorney, she focused on a broad range of commercial litigation, including some involving financial institutions.

The work got her noticed.

Her oratory in the case against the American Coalition of Life Activists, which she ultimately won in a landmark $107 million victory, was praised by Martin London, her litigation partner and a legendary New York attorney.

Steven M. Cohen, the general counsel at MacAndrews & Forbes.
Vullo has earned a reputation as a demanding boss. “In a pleasant enough way, she tends to push people,” said Steven M. Cohen, the general counsel at MacAndrews & Forbes.

In a memoir published this year, he described how her presentation’s rehearsal had been received by other lawyers.

“When Maria was finished, the audience sat open-mouthed at the awe-inspiring performance,” he wrote.

Vullo, a no-frills dresser with rebellious curls poking out of a square bob cut, also challenged the image of a high-powered attorney.

“One of the problems with diversity,” she said, “is if the people that are in charge are all of a certain type, they view other people through their own personal lens, and that creates difficulty for diverse people to move up in the chain.”

At Paul Weiss, she was only the second woman to make partner in the firm’s litigation division.

“We go back to a period where there were very few women partners,” said Judith Thoyer, a former colleague of Vullo’s at Paul Weiss. “It’s going to shape you in some way.”

Since then, Vullo has earned a reputation as a demanding boss. “In a pleasant enough way, she tends to push people,” said Steven M. Cohen, the general counsel at MacAndrews & Forbes, and former top aide to New York Gov. Andrew Cuomo. “Push people who work for her and frankly push people who she is working with.”

But she has also demonstrated a capacity to adapt, especially when victory was at stake.

When she was lead litigator in the case against the ACLA, which stood accused of inciting murders against abortion doctors, Vullo was the one who invited London to join the trial team.

“He was one of my mentors and one of the country’s top trial lawyers,” she explained in a follow-up email. But, she added, “I was also mindful that on this particular jury case, it didn’t hurt to have a man on an otherwise all-female team.”

New Era

Under Vullo, the Department of Financial Services, a consolidated agency created in the wake of the financial crisis, faces a vastly different landscape than it did back then. Yet some still view her as an extension of Cuomo, a forceful leader who is famous for micromanaging his staff.

“It’s a different time,” Smith said. “Her predecessor was coming in the aftermath of the financial crisis … so there were a different set of issues.”

Today, “everyone in the industry agrees that if you were to select the top issues facing the industry, it would be cyber, followed by fintech.”

Sean Coffey, a partner at Kramer Levin.
The New York State department "remains a very formidable regulator,” said John P. “Sean” Coffey of Kramer Levin, “but one that is open to hearing the other side of the story."

Vullo’s first stint in public service came in 2010, when she worked under Cuomo at the state attorney general’s office. There, she led the “economic justice” portfolio, pursuing Ivy Asset Management in a case related to the Bernie Madoff scheme and Ernst & Young for its auditing practices at Lehman Brothers.

Before that, Vullo had been on the short list for a judgeship on the New York State Court of Appeals twice, in 2013 and 2014.

Though she has contributed nearly $85,000 to his campaigns since 2001, according to the New York State Board of Elections’ campaign finance database, she did not get the role.

Then, in January 2016, she was nominated by Cuomo to become the second head of New York State Department of Financial Services, for what could mark a new era in the agency’s relationship to Wall Street.

The criticism from some fintech players aside, John P. “Sean” Coffey, a partner at Kramer Levin and former colleague of Vullo’s, said she is willing to consider valid points made by the industry.

“DFS remains a very formidable regulator,” he said, “but one that is open to hearing the other side of the story and weighing carefully arguments that are put forth by supervised entities.”

And there is one point her admirers and critics agree on: Vullo can be relied on to speak her mind.

“She is not following some hidden agenda,” said Lawrence Kaplan, a bank regulatory attorney of counsel at Paul Hastings. “You know exactly what you are getting.”

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Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.