On December 12, 2017, the U.S. District Court for the Southern District of New York dismissed the New York Department of Financial Services’ (NYDFS) suit against the Office of the Comptroller of the Currency (“OCC”) challenging the proposed special purpose national bank for financial technology companies (“OCC FinTech Charter”). The OCC FinTech Charter would apply a bank regulatory framework to financial technology companies to help ensure that they operate in a safe and sound manner.
In May of this year, New York Superintendent of Financial Services Maria T. Vullo sued the OCC on the grounds that the OCC does not have the authority to issue the charter, since the OCC FinTech Charter would not concern the “business of banking,” which includes the taking of deposits. The Conference of State Banking Supervisors (“CSBS”) similarly filed suit.
Judge Naomi Reice Buchwald ruled that NYDFS does not have standing to bring its suit against the OCC, since the OCC has not reached a final decision regarding whether to issue OCC FinTech Charters. Judge Buchwald further noted that whether the new Comptroller, Joseph Otting, will continue to pursue the special purpose charter proposals remains uncertain.
While not addressed in the decision, the proposed OCC FinTech Charter has been controversial from the beginning. The Conference of State Banking Supervisors, as well as many states – most prominently New York – have been highly critical and have argued that the OCC lacks the authority to issue the charter. The proposal has also been controversial on the Hill with Senators Sherrod Brown (D-OH) and Jeff Merkley (D-OR) being especially critical.
While Acting Comptroller Keith Noreika was very supportive of the OCC FinTech Charter, it remains to be seen whether new Senate-confirmed Comptroller Joseph Otting will take up the banner. However, given past OCC positions, it will be difficult for Comptroller Otting to acquiesce to the CSBS and NYDFS position on the OCC’s chartering authority.
The OCC, in the past, has broadly construed its authority to charter national banks to conduct the “business of banking” and the “incidental powers” necessary to carry on banking. The OCC also has chartered special purpose national banks, which may limit their businesses to fiduciary, payments, credit card activities, or any other business within the business of banking. It is equally true that the state regulators have often expressed concern about the OCC’s authority long before the controversies over the OCC FinTech Charter because state law typically provides broad state authority over conducting business in the states and the OCC’s position has, in many cases, led to loss of state authority over many activities deemed within the OCC’s application of the “business of banking” test. This is not a new battle, and very likely will be renewed with intensity if the OCC proceeds toward issuing a FinTech charter.
 See 12 U.S.C. §1 et seq. ; OCC Interpretations and Actions available at www.occ.gov/topics/licensing/interpretations-and-actions/index-interpretations-and-actions.html.