Judge Tosses CSBS Suit Challenging OCC’s FinTech Charter Proposal

A federal judge this week dismissed a lawsuit by the Conference of State Bank Supervisors (CSBS) testing the Office of the Comptroller of the Currency’s (OCC) proposal to grant special purpose bank charter to financial technology (FinTech) companies. The dismissal comes a few months after a similar legal challenge by the New York Department of Financial Services (NYDFS) was also thrown out as speculative.

Announced in 2016, the OCC has mulled offering special purpose bank charters to FinTech companies with the effect of bringing these institutions under the exclusive umbrella of federal law. The change in presidential administrations shortly after the charter system was proposed delayed its implementation. More recently, Comptroller Joseph Otting claimed the agency would be rendering a final decision on whether or not to begin issuing the charters within a few months.

The lack of finality with the proposal at the OCC has not stopped state banking officials from challenging the special purpose charter system. Just like the suit filed by NYDFS, the judge in the CSBS challenge found the lawsuit to be speculative, since the OCC had made no final decision on whether or not to actually begin issuing the charters.

In both cases, the federal judges did not address the merits of the challenges, simply rendering judgment on the ripeness. This means that either or both parties may refile their suits in the future should the OCC actually go through with the charter proposal.

Demand amongst financial technology companies for federal bank charters has been present for some months now, with a few FinTechs even seeking traditional bank charters in the interim.