Last month, the US District Court for the Southern District of New York dismissed the lawsuit brought last spring by the New York State Department of Financial Services (DFS) challenging the ability of the federal banking regulator, the Treasury Department’s Office of the Comptroller of the Currency (OCC), to issue a specialized bank charter to financial technology businesses. (See our previous post on the lawsuit here.)
As noted in our previous posts on this matter, in 2016, the OCC asked for comments from the public regarding it possibly issuing a special purpose national bank charter to financial technology companies. The DFS, among many other commenters, registered its opposition to the concept, arguing, among other things that it would lead to regulatory uncertainty. A 2017 issuance setting out proposed requirements for issuance of such a bank charter also was opposed by the DFS and the Conference of State Banking Supervisors (CSBS), the trade association for state bank regulators. In May of 2017, both the DFS and CSBS brought lawsuits in federal court in New York and the District of Columbia respectively, challenging the authority of the OCC to issue such a charter. The OCC filed motions in court to dismiss both actions.
This fintech initiative began during the Obama Administration, but the Trump Administration’s OCC has not yet made a final decision as to whether it will issue such a special purpose national bank charter. Judge Naomi Reice Buchwald cited that fact in dismissing the case, noting that the DFS had suffered no required “injury in fact” necessary to have standing to bring the case, and that the claim was not “ripe” for judicial consideration at this time because there had been no special purpose bank charter issued, nor was it certain that one would ever be issued. While the Court declined to order the OCC to inform the DFS once a final decision was made to accept applications for these charters, it did suggest that “it would be sensible” for the OCC to provide such notice to DFS when it did, given the DFS’s intention to continue to pursue its legal challenge.
DFS Superintendent Maria Vullo issued a statement after the Court issued its opinion, expressing its appreciation of the Court’s suggestion that the DFS be notified once it has reached a final decision on whether to pursue issuance of such charters and expressing “hope that the OCC will abandon its pursuit of the chartering of nondepository institutions.”
The motion to dismiss the federal court case brought by CSBS, in which the DFS also is participating, still is pending decision.