Non-Compete Clause Customers in Licensing Deals

The question in full

In the fintech ecosystem, the question of 'Customer Ownership' is the most litigated section of sponsorship agreements. While a Principal License Holder provides the regulatory 'Umbrella,' they often have technical access to your entire database of users for AML/KYC purposes.

Answer

We have seen requests such as: “Customers of our company, onboarded in the solutions provider legal entities, should not be reached for any other business/service/product related matter different than the one provided by our company, during the time of the agreement and at least 3 years after its dissolution or finalization. Customers should be contacted for any other service or product by our company only.”

Almost no solution provider will agree to this clause (at least the ones we work with). If they provide licensing coverage, technically and legally, the client belongs to them. Putting this clause is in contravention to the MTL requirements and obligations they have from their state, the federal authorities, and especially from BSA and CFPB angle.

Is there a non-compete clause for the customers that we bring in?

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