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Most Read Contributor in United States, August 2018
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.
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