OCC Fintech Charter Setback
In December 2016, the Office of the Comptroller of the Currency (OCC) announced the creation of a special purpose national bank charter under the National Bank Act (NBA) (see our Maryland Legal Alert - December 2016).
The OCC then announced in July 2018 that it was ready to accept applications from fintech firms for the new bank charter. The announcement was met with resistance from several state banking regulators, who believed the OCC had stepped beyond its authority under the NBA.
In September 2018, the Superintendent of the New York State Department of Financial Services (NYDFS) filed suit in the U.S. District Court for the Southern District of New York against the OCC, challenging the OCC’s authority to create the new, special purpose charter.
In February 2019, the OCC moved to dismiss the NYDFS’s action.
In May 2019, the court denied the OCC’s motion to dismiss, in part, based primarily on the argument that bank charters are only available to institutions that take deposits because of language in the NBA concerning institutions involved in the “business of banking.”
On October 21, 2019, the court then issued a supplemental order confirming that all issues in the NYDFS complaint had been resolved in the May 2019 order, and the court entered judgment in favor of the NYDFS and closed the case.
Practice Pointer: This is a setback for the OCC’s efforts to provide the same preemptive authority for fintech firms to operate in multiple states with some degree of lending uniformity. The OCC has indicated that it intends to appeal the recent ruling in favor of the NYDFS. We will continue to monitor the case.
For questions concerning fintech charters and fintech regulation, please contact Christopher Rahl.