Law360's Jon Hill recently sat down with some of the banking industry's litigation leaders on recent developments, case law, and what to expect as we approach an uncertain 2022. Jeff Alberts, co-head of Pryor Cashman's FinTech practice, discussed the collision course of traditional banks and Fintechs under the new Biden administration.
As Hill notes,
"As these largely state-regulated nonbank fintechs have
matured, more are finding it economically advantageous to
restructure themselves as banks. And in recent years, the Office of the
Comptroller of the Currency has been receptive to these
efforts, offering a customized federal banking charter intended for
fintechs and approving several other charters for nontraditional,
fintech-oriented banks...State regulators haven't been
thrilled, to say the least. During the Trump administration, for
example, they sued multiple times to shut down the OCC's
fintech charter program, considering it to be an unlawful,
anti-consumer power grab from the states.
But those lawsuits ended up largely fizzling, with courts —
including the Second Circuit last year — repeatedly
dismissing them as premature because the OCC has to date never
received, let alone approved, a fintech charter
application."
Still, Pryor Cashman LLP partner
Jeffrey Alberts told Law360 that these tensions could flare up
again in the coming year and spark renewed litigation over the
future of regulation for the banking industry's fintech
rivals.
"The fight between the OCC and the state banking regulators
over who's going to regulate fintechs isn't over,"
said Alberts, who works in his firm's financial institutions
and fintech groups.
For one, Alberts noted that the previous fintech charter lawsuits
were never resolved on the merits. That's left open the core
legal question of whether federal law permits the OCC to license
and regulate fintechs as banks if they don't take deposits,
which most fintechs avoid because of the additional regulatory
burdens involved.
And while the fintech charter itself hasn't exactly
been in high demand, cryptocurrency companies and other fintech
firms have been exploring alternative charters from the OCC,
creating new opportunities for friction with the banking industry
and litigation with state regulators."
Resources
Originally published by Law360
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.