Update: On July 23, 2020, the New York Department of Financial Services (“DFS”) filed its appellate brief asking the Second Circuit Court of Appeals to uphold the lower court’s decision to block the Office of Comptroller of the Currency’s (“OCC”)’s special purpose national bank charter (“fintech charter”). Please see our July 28 post for more details.
On October 25, 2018, the Conference of State Bank Supervisors (CSBS) renewed its lawsuit against the Office of the Comptroller of the Currency (OCC) seeking to prevent the OCC from issuing its long awaited special-purpose bank charters to fintech companies. The OCC recently announced that it would begin accepting applications for the special-purpose charter, a move that would allow the OCC to regulate fintech companies similar to their supervision of national banks.
The lawsuit, filed in the U.S. District Court for the District of Columbia, comes on the heels of a similar suit brought against the OCC in the Southern District of New York by the New York State Department of Financial Services (DFS) Superintendent Maria T. Vullo. Both complaints challenge the OCC’s authority in providing the special-purpose charter under the National Bank Act (NBA) arguing that fintech “nonbanks” do not fall within the “business of banking” or any other authorized special-purpose provision. The lawsuits place a significant emphasis on the role of the state regulator in the U.S. dual-banking system, arguing that states are uniquely qualified to regulate banking practices and enable financial innovation. In addition to lacking statutory authority, the lawsuits argue that the OCC’s actions were arbitrary, unconstitutional, and procedurally defective, as the OCC failed to adhere to notice provisions under the NBA.
Since the OCC’s first public announcement of the charter in 2016, the special-purpose charter has faced criticism from state regulators. Both the CSBS and DFS previously filed complaints questioning the OCC’s statutory authority, but the complaints were dismissed as speculative and unripe for judicial review.