OCC’s Proposed Charter for Fintech Companies in Limbo
Late last year, the Office of the Comptroller of the Currency (“OCC”) announced that a proposed national charter for fintech companies is currently on hold as the OCC’s new Comptroller of the Currency, Joseph Otting, needs additional time to study the proposed charter. “Fintech” stands for Financial Technologies and is a relatively new industry that encompasses technologies used in the financial services sector, particularly disruptive new technologies such as mobile payments, money transfers, and fundraising. Under the previous Comptroller of the Currency, Thomas Curry, the OCC had proposed granting a special purpose national bank charter for fintech companies and had released a report outlining the OCC’s legal authority to grant such a special purpose charter.
Despite the fact that the OCC has not yet granted a national charter for fintech companies, the proposal to do so has already been the subject of two different court challenges by state regulatory authorities. The first of those actions, Vullo v. Office of the Comptroller of the Currency, 17 Civ. 3574 (S.D.N.Y.), was brought by the New York Department of Financial Services (“NYDFS”), which filed suit in the U.S. District Court for the Southern District of New York in May 2017. In its complaint, the NYDFS alleged, among other things, that the OCC should be barred from granting a national charter for fintech companies because such a charter exceeds the OCC’s statutory authority and impedes upon regulatory authority properly left to the states. On December 12, 2017, Judge Naomi Reice Buchwald granted the OCC’s motion to dismiss that case, holding that “[s]ince the OCC has not reached a final ‘Fintech Charter Decision,’ defendants’ 12(b)(1) motion is granted as plaintiff has suffered no injury in fact as required for Article III standing and because plaintiff’s claims are not ripe.”
The second lawsuit, Conference of State Bank Supervisors v. OCC, 17 Civ. 00763 (D.D.C.), was brought by the Conference of State Bank Supervisors (“CSBS”) in April 2017 in the U.S. District Court for the District of Columbia. The CSBS’s complaint claims (1) that the OCC does not have the authority to issue a national bank charter to fintech firms, and (2) that the OCC violated the Administrative Procedure Act by not undertaking a formal rulemaking process. Moreover, like the NYDFS, the CSBS alleged that the OCC’s proposed national charter for fintech companies would improperly intrude on regulatory authority left to the states. On August 2, 2017, the OCC moved to dismiss the CSBS’s complaint, arguing, among other things, that the CSBS’s claim is not ripe because the OCC has not made a final decision with respect to a national charter for fintech companies. The District of Columbia court has not yet ruled on the CSBS’s motion, though it seems likely that it – like the court in the NYDFS case – will find that the CSBS’s claims are not yet ripe. Thus, unless and until the OCC decides to proceed with a national charter for fintech companies, questions regarding the OCC’s legal authority to grant such a charter are likely to remain unresolved.