On September 14, 2018, New York State Department of Financial Services (“DFS”) Superintendent Maria T. Vullo filed a lawsuit against the Office of the Comptroller of the Currency (“OCC”) in connection with the OCC’s recent decision to begin accepting applications from nondepository financial technology companies (“fintechs”) for special purpose national bank charters (the OCC’s “Fintech Charter Decision” or “Decision”).
Superintendent Vullo’s lawsuit, which was filed in the U.S. District Court for the Southern District of New York, characterizes the Fintech Charter Decision as a “reckless folly” that will harm both consumers and businesses. The complaint claims that the Decision is illegal because it exceeds the OCC’s statutory authority and asks the court to both declare the Fintech Charter Decision to be “null and void” and permanently enjoin the OCC from implementing it.
The complaint is largely identical to one that Superintendent Vullo filed against the OCC in May of 2017. The prior action, which was also filed in the U.S. District Court for the Southern District of New York, was dismissed without prejudice in December on ripeness grounds.
Superintendent Vullo’s move is not entirely unexpected, as she has clearly voiced her strong opposition to the idea of a fintech charter. Shortly after the OCC announced its Decision on July 31, 2018, she issued a statement indicating that the DFS viewed the Decision as unjustified and unauthorized under the National Bank Act. On September 18, 2018, she issued another statement, asserting in part that the Decision “is not about consumer choice but is instead a lawless, ill-conceived scheme to destabilize financial markets that are properly and most effectively regulated by the states.”
As noted in its July 31, 2018, press release announcing its Decision, the OCC’s position is that the agency has statutory authority to issue a national bank charter to a company that engages in one of three core banking functions—namely, paying checks, lending money, or taking deposits—and that such authority does not require the company to accept deposits.
The OCC will likely soon face a similar lawsuit brought by the Conference of State Bank Supervisors (“CSBS”). The CSBS initially sued the OCC over the fintech charter concept in the U.S. District Court for the District of Columbia in April of 2017; that case, like Superintendent Vullo’s previous case, was dismissed by the court on ripeness grounds before the OCC announced its Fintech Charter Decision. On September 12, 2018, the CSBS issued a statement indicating that the Board of Directors of the CSBS had voted to renew litigation efforts against the OCC and that another action would be filed “at a time deemed appropriate.”