WASHINGTON — In two separate letters to regulators, several Senate Democrats Thursday criticized various aspects of the fintech industry, including banking as a service provider arrangements and buy now/pay later companies. 

Sens. Elizabeth Warren, D-Mass., and Chris Van Hollen, D-Md., both on the Senate Banking Committee, asked the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to ban the use of the FDIC name or logo for companies that provide only pass-through FDIC insurance, and to directly supervise those companies under the Bank Service Company Act. 

"You possess clear statutory authority to regulate service providers directly," the letter reads. "In the immediate term, given the threat posed to consumer deposits by the safety and soundness vulnerabilities of BaaS and fintech companies, we urge you to use your existing authority … to directly supervise and examine these entities and address these threats." 

The call comes amid uncertainty following the collapse of Synapse, a fintech middleman that connected fintech apps like Juno and Yotta with banks like Evolve. The middleware firm's messy bankruptcy resulted in millions of consumer funds frozen or lost, and left those consumers confused about the extent to which their funds were covered by FDIC insurance. 

"The rapid growth of these partnerships risks harming consumers while posing a broader threat to the stability of our banking system and the economy," the lawmakers said. 

The FDIC has issued a number of consent orders to fintech or crypto companies asking them to clarify statements about deposit insurance in instances where the agency felt it was being misrepresented, but it does not ban the statements outright.

The agency will also meet next week in an open board meeting to discuss "Notice of Proposed Rulemaking on Custodial Deposit Accounts with Transaction Features and Prompt Payment of Deposit Insurance to Depositors," a topic that is likely to address some of the regulatory shortcomings that Synapse's failure has brought to light. 

Separately, Sens. Jack Reed, D-R.I., a senior member of the Senate Banking Committee; Sherrod Brown, D-Ohio, the chairman of the panel; and Tammy Duckworth, D-Ill., wrote to the Consumer Financial Protection Bureau about another issue: buy now/pay later.

"Some of these products can include hidden fees, create negative history in a consumer's credit report, and encourage consumers to rack up debt they cannot afford to repay that could later harm their long-term financial health," the lawmakers said. 

The lawmakers urged the bureau to begin regulating BNPL products as credit cards. Doing so, the lawmakers said, would finalize an interpretive rule clarifying that BNPL companies are responsible for providing consumers with credit card-like protections. 

Doing so, the lawmakers said, would "help consumers address problems when they do not get what they pay for and will help ensure that BNPL lenders deal with their customers fairly and honestly. We view the Rule as a first step to bringing BNPL within the regulatory perimeter and urge the CFPB to go further by supervising the largest BNPL firms and tightening its regulations if necessary based on additional data."  

They also told the CFPB to "move quickly toward bringing the largest BNPL lenders under federal supervision in order to better protect consumers from unfair, deceptive and abusive acts and practices."