OCC Faces Another Lawsuit Over FinTech Charters
Weeks after New York Department of Financial Services superintendent Maria Vullo filed suit against the Office of the Comptroller of the Currency (OCC) in a bid to halt the agencies issuance of FinTech bank charters, more state regulators are following in Vullo’s footsteps. As Reuters reports the Conference of State Bank Supervisors (CSBS) has filed a complaint in Washington D.C., arguing that the Special Purpose National Bank charters should not move forward. This is just the latest blowback the OCC has seen since announcing the new charters in July.
In a statement regarding the lawsuit, CSBS president and CEO John Ryan said, “Common sense and the law tell us that a nonbank is not a bank. Thus, CSBS is calling on the courts to stop the unlawful, unwarranted expansion of powers by the OCC.” Meanwhile OCC spokesman Bryan Hubbard did not respond to Reuters’ request for comment but had previously stated that the agency was ready to defend their authority to issue the new charters. Furthermore, PYMNTS notes that Hubbard has said that “state laws that address anti-discrimination, fair lending, debt collection … would also apply to special purpose national banks. State laws that prohibit unfair or deceptive acts or practices that address concerns such as material misrepresentations and omissions about products and services … also generally apply to national banks.”
The uncertainty surrounding the Special Purpose National Bank charter has reportedly dissuaded some FinTechs from applying for them. According to Reuters, several companies have informed them that they’re hesitant to pursue the charters while legal challenges are still being worked out.
It’s really no wonder that state regulators might take offense to the OCC’s plan to issue national charters. After all, the entire idea of these Special Purpose National Bank charters was to give FinTech startups a way to sidestep applying licensing in each individual state — something that can be both expensive and time-consuming. With many FinTech firms already being capital intensive operations, the goal of the national charter was to streamline the regulatory process and spur innovation.
While the OCC’s FinTech charter plans may be in limbo at the moment, the good news is that many firms are still able to operate as normal. This is to say that many companies have already gone through the trouble of gaining regulatory approval in most if not all of the states, meaning this legal battle doesn’t have a direct impact on them. At the same time, younger startups that may have seen the national charters as their ticket to breaking out will seemingly have to wait and see how everything shakes out.