Not content to continue merely voicing strong opposition to the proposal of the U.S. Treasury Department’s Office of the Comptroller of the Currency’s (“OCC”) proposal to issue a special purpose national bank charter to financial technology (“fintech”) companies, the Conference of State Bank Supervisors (“CSBS”), the trade association for state bank regulators, and the Superintendent of the New York State Department of Financial Services (“NY DFS”) each recently filed lawsuits against the Comptroller and the OCC to prevent the Comptroller from approving and issuing such charters.

Our previous blog posts on the OCC proposal can be accessed here and here.

CSBS notes in its Complaint that while its member bank regulators could each bring their own lawsuits, CSBS does have standing to sue on its members’ behalf and cited past federal court cases that recognized CSBS’s “associational standing” to sue the OCC.

The Complaint of CSBS member NY DFS seeks to stop the OCC from granting these fintech special purpose national bank charters to entities subject to New York State law that provide financial services to New York consumers. The Superintendent states in her Complaint that the OCC’s decision “is lawless, ill-conceived, and destabilizing of financial markets that are properly and most effectively regulated by New York State,” and provides examples of concrete harm that could occur to New York’s ability to enforce state consumer protection and other laws should those charters be issued.

The CSBS lawsuit was brought in the U.S. District Court for the District of Columbia and the NY DFS lawsuit was brought in the U.S. District Court for the Southern District of New York, but both are seeking the same end – the Court declaring that the OCC does not have the statutory authority to issue its proposed fintech special purpose national bank charters and issuing an injunction against the OCC implementing this proposal.

The specific arguments set forth by CSBS and the NY DFS for the requested relief are similar, except for the specific Administrative Procedure Act arguments which were unique to the CSBS Complaint:

  • The OCC’s decision to issue fintech special purpose national bank charters exceeds its statutory authority set out in the National Bank Act which authorizes the OCC to issue charters to entities to carry on “the business of banking” or to entities for a special purpose expressly authorized by Congress, such as national trust banks.
  • The OCC exceeded its statutory authority when it promulgated a regulation purporting to expand its chartering authority to allow it to issue national bank charters for purposes not otherwise specifically authorized in the National Bank Act.
  • The OCC’s decision to issue fintech special purpose national bank charters violates the Federal Administrative Procedure Act (“APA”) because the decision is a rule that should have been promulgated in accordance with the APA, which the OCC did not do.
  • The OCC violated the APA’s requirement that an agency cannot act in an “arbitrary or capricious” manner by not only acting without statutory authority in making its decision to issue these charters, but in doing so, it also failed to take into consideration the effect of its decision on the ability of states to regulate “traditional areas of state concern,” did not conduct an adequate cost-basis analysis and did not provide a reasonable explanation for its decision.
  • The OCC’s decision runs afoul of the U.S. Constitution’s Tenth Amendment under which states retain powers not otherwise delegated to the United States under the Constitution, nor prohibited by it, and creates a conflict with state law to the extent it would enable these fintech special purpose national banks to disregard state consumer laws that previously would have been applicable but for the national bank charter.