On October 25, 2018, the Conference of State Bank Supervisors (“CSBS”) filed a lawsuit in the U.S. District Court for the District of Columbia against the Office of the Comptroller of the Currency (“OCC”) seeking to stop the OCC from issuing any special-purpose national bank charters to financial technology companies that do not receive deposits (“fintech charters”). The CSBS’s lawsuit comes just over a month after New York State Department of Financial Services (“DFS”) Superintendent Maria T. Vullo filed a similar action against the OCC in the U.S. District Court for the Southern District of New York, and about three months after the OCC formally announced its decision to begin accepting applications for fintech charters (the “Fintech Charter Decision”).
The central issue to both the CSBS’s and DFS’s lawsuits is whether the OCC has statutory authority to issue fintech charters under the National Bank Act (the “NBA”). Under the plain language of the NBA, the OCC has authority to issue charters to entities that conduct the “business of banking” as well as to specific types of institutions for which Congress has expressly granted the OCC authority, such as national trust banks and banker’s banks. In their lawsuits, the CSBS and DFS contend that the “business of banking” requires the receiving of deposits. Thus, the CSBS and DFS argue that the OCC’s issuance of a fintech charter to nondepository institutions would exceed the OCC’s statutory authority because such a charter would not fall within the “business of banking” or within any special-purpose statutory provision. To help make its point as clear as possible, the CSBS consistently refers to the fintech charter as a “nonbank charter” throughout the Complaint rather than as a special-purpose national bank charter.
The OCC has consistently maintained that the “business of banking” does not require an institution to receive deposits and, therefore, that a fintech charter is within the scope of the agency’s authority under the NBA. The OCC has also justified its Fintech Charter Decision on policy grounds. For example, in testimony before the Senate Committee on Banking, Housing, and Urban Affairs on October 2, 2018, Comptroller Joseph M. Otting championed the fintech charter as a means of providing “companies interested in banking with another choice, alongside others such as becoming a state bank, operating as a state-licensed financial service provider, or pursuing a partnership or business combination with an existing bank,” thereby promoting “a wider range of products and services available to consumers, lower regulatory costs, and more effective supervision.”
DFS Superintendent Vullo was quick to issue a statement in support of the CSBS’s action. In her statement, Superintendent Vullo emphasizes that the DFS “ardently concurs” with the CSBS that the NBA does not provide the OCC with authority to issue a fintech charter, and she criticizes the OCC’s Fintech Charter Decision as “threatening state sovereignty, community banking, and strong state consumer protection laws, including New York’s usury laws.”