On Dec. 12, the U.S. District Court of the Southern District of New York dismissed a lawsuit from the New York State Department of Financial Services challenging the Office of the Comptroller of the Currency's authority to issue special-purpose fintech charters, clearing one of two lawsuits related to the OCC's efforts to expand the national banking charter beyond the banking industry. The New York state regulator had tried to argue that by trying to regulate nonbanks, the OCC was entering regulatory space that belonged to the state.
In her dismissal order, Judge Naomi Reice Buchwald wrote that the New York state regulator could not claim injury because the OCC has yet to actually issue a special-purpose national bank charter to a fintech company. The judge dismissed the case on the grounds of a "lack of subject matter jurisdiction." The judge wrote that she did not see how the OCC's decision to issue fintech charters, of its own accord, damages the New York State Department of Financial Services.
"In the absence of a 'Fintech Charter Decision,' DFS's purported injuries are too future-oriented and speculative to constitute an injury in fact," Buchwald wrote.
In December 2016, then-Comptroller of the Currency Thomas Curry announced that the OCC would grant charters to financial technology companies that engage in one of three core banking activities: Taking deposits, paying checks, or lending. Curry envisioned the charter as a way to expand consumer access to financial products while keeping companies under regulatory watch.
Maria Vullo, the superintendent of the New York State Department of Financial Services, immediately criticized the announcement, arguing that states are better suited to regulate nonbanks than a federal regulator would be. Vullo filed a lawsuit in May 2017 on the basis that the OCC had overstepped in its functions as a primary banking regulator by asserting its authority over "commercial ventures never before authorized or regulated by the OCC."
With the arrival of the Trump administration, Curry was replaced by banking lawyer Keith Noreika in an acting capacity. Although Noreika reversed course on a number of OCC issues, Noreika defended the OCC's authority to grant bank charters to fintech companies but regularly reminded the public that the OCC has yet to decide on whether it would actually do so. Noreika said the OCC had yet to receive any applications. It was the absence of any issued fintech charters that led Buchwald to dismiss the case.
The court, however, suggested that the OCC communicate with the New York State Department of Financial Services if it does move forward on actually granting charters.
In a statement, Vullo said the court did not issue a ruling on the OCC's authority to issue a fintech charter under the National Bank Act.
"We hope that the OCC will abandon its pursuit of the chartering of nondepository institutions," Vullo said.
A spokesperson for the OCC declined to comment.
The OCC still faces a lawsuit regarding its fintech charter from the Conference of State Bank Supervisors. In April, the CSBS filed a complaint in the U.S. District Court for the District of Columbia similarly arguing that the OCC does not have the statutory authority to offer the charter.
