State regulators filed a complaint against the Office of the Comptroller of Currency ("OCC") in a bid to prevent the creation of a special-purpose national charter for fintech companies. The complaint was filed in the United States District Court for the District of Columbia by the Conference of State Bank Supervisors ("CSBS"), a nationwide organization of financial regulators from all 50 states.
The state regulators allege that the creation of a national bank charter for nonbank companies goes beyond the OCC's authority under the National Banking Act and other federal banking laws. The thrust of the complaint is that the OCC is only authorized to charter institutions that engage in the "business of banking" (i.e., in activities that at a minimum require receiving deposits), and that a special-purpose charter for nonbanks would require specific congressional approval. The state regulators also argue that (i) such a special purpose charter could be extended to a wide variety of service providers, given the ambiguous definition of "fintech," and (ii) a federal regime will preempt states' ability to regulate fintech firms.
CSBS President and CEO John W. Ryan said that "[t]he OCC's proposed action ignores Congress, seeks to preempt state consumer protection laws, harms markets and innovation, and puts taxpayers at risk of inevitable fintech failures. This is a dangerous combination and one the court should decisively halt."
Commentary / Jacob Dachs
Notably, this fight does not include an actual participant in the fintech industry (yet) and is essentially a jurisdictional dispute between state and federal regulators that has been brewing for the past few months.
It will be interesting to see how the industry chooses sides. Expect the more established startups to back the OCC initiative, since a national charter would help them gain credibility. On the other hand, the largest banks have been developing their own in-house fintech innovations, and they are already nationally chartered. This may cause them to oppose the OCC here since the status quo could leave them with a potential advantage over the startup industry.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
