OCC’s FinTech Charter Plans Struck Down by Judge
Ever since the Office of the Comptroller of the Currency announced plans to offer FinTech startups special purpose national bank charters, the move has been marred in controversy. In addition to criticism from politicians, those plans led to lawsuits being filed by state regulators and the Conference of State Bank Supervisors alike. Now a judge has sided with those detractors, declaring that the OCC does not have the right to offer FinTechs such charters.
As the Wall Street Journal reports, a federal district court judge in New York has struck down the OCC’s FinTech charter plans. The ruling is in response to a suit originally filed by New York Department of Financial Services superintendent Maria Vullo, with current acting superintendent Linda Lacewell serving as plaintiff. According to Lacewell, the decision “stops OCC’s attempt to usurp state authority by establishing a federal FinTech regulatory framework at the expense of consumers.”
In his ruling, Judge Victor Marrero wrote, “[R]ead in the light of its plain language, history, and legislative context, unambiguously requires that, absent from a statutory provision to the contrary, only depository institutions are eligible to receive national bank charters from OCC.” Notably this declaration comes more than a year after the agency began accepting applications for the new charters. However no charters have been issued at this time. Incidentally this fact is what led U.S. District Court for the District of Columbia judge to toss out the Conference of State Bank Supervisors’ suit against the OCC just last month.
While this decision is certainly a setback to the OCC and FinTechs who were hoping to make use of the “special purpose national bank” charters, the fight isn’t over just yet. Just as the OCC has previously vowed to move forward with their charter plans in spite of legal challenges, a spokesperson confirms plans to appeal the latest ruling. As they said in a statement, “The agency disagrees with the decision and the court’s interpretation of the authority the National Bank Act grants the OCC.”
At this point it’s been nearly three years since the OCC initially revealed plans for its FinTech charters. Unfortunately in that time it feels as though we’ve only moved further away from them becoming a reality. Nevertheless, as mentioned, this battle is far from done and it’s certainly possible that the agency comes out on top in the end. In the meantime, it seems FinTechs will have to continue their expansion efforts under the current state-by-state regulatory system.