If you will recall, last year the OCC proposed a new banking charter that if made available, could be used by tech companies to participate in banking activities more directly. As reported in the New York Law Journal, the State of New York was not pleased and sued the OCC:
The U.S. Office of the Comptroller of the Currency’s plan to offer a special-purpose bank charter for financial technology companies “undermines” the Department of Financial Services’ regulatory authority in New York, the state agency argued in court documents.
“The Fintech Charter Decision is an unlawful assertion of power that usurps New York consumer protection laws and would preempt plaintiff’s ability to regulate any number of the over 600 non- depository institutions she currently regulates,” wrote Matthew Levine, the executive deputy superintendent for enforcement at the department.
The U.S. Attorney representing the OCC said the suit should be dropped because the so-called Fintech Charter doesn’t yet exist, and it might not ever become available.
Acting U.S. Attorney Joon Kim, representing the defendants, argued that DFS lacks standing in the complaint because the OCC’s regulations addressing the special-purpose national bank charter have resulted in no injury-in-fact, because the office has not reached a final decision on whether it will offer the specific type of national bank charter that does not take deposits and conducts activities other than fiduciary activities. The U.S. Attorney’s Office also argues that the complaint should be dismissed for failure to state a claim.
Some tech companies including Square and SoFi are not waiting around for this to get settled. They have both recently applied for industrial loan charters to support their business activities.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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