Lawsuit over OCC’s Fintech Charter Thrown Out… Again

Sep 6, 2019 | Litigation, News

In a ruling earlier this week, U.S. District Judge Dabney Friedrich dismissed a lawsuit by the Conference of State Bank Supervisors (CSBS) over the Office of the Comptroller of the Currency’s (OCC) plan to issue a special fintech charter. This is the second time a judge has dismissed a CSBS lawsuit over the same issue. 

For some background, the New York’s Department of Financial Services (DFS) and CSBS each filed suit in early 2017 seeking to block implementation of OCC’s special purpose bank charter system intended to bring fintech companies away from state rule and under federal supervision. A federal judge dismissed New York’s lawsuit in December 2017. Four months later, a federal judge tossed CSBS’ lawsuit. The lawsuits were deemed speculative and prudentially unripe.

In September 2018, CSBS announced that it would file a second lawsuit against the OCC. “A federal court had ruled prior litigation as not yet ripe for consideration,” a press release said. “With the OCC’s July 31 announcement creating a federal fintech charter, the CSBS Board decided to reaffirm its commitment to challenge the OCC’s action.

Unfortunately for CSBS, Judge Friedrich ruled that CSBS’ second lawsuit “continues to lack standing and its claims remain unripe … To start, CSBS still fails to plead an injury in fact that is either actual or imminent,” Judge Friedrich wrote. “In CSBS I, the Court reasoned that each of the alleged harms was contingent on whether the OCC charters a Fintech. That reasoning still applies because CSBS’s alleged harms remain the same, and the OCC still has not chartered a Fintech.”

Along with CSBS, New York’s DFS also filed a second suit against the OCC. A different judge ruled several months ago that their challenge was “ripe for adjudication.” Judge Friedrich acknowledge the contrast in the two rulings and stated that the two judges respectfully disagreed with each other.  

OCC spokesperson Bryan Hubbard said that the federal agency was pleased with the CSBS dismissal. “It is important that the regulatory framework for the national banking system is allowed to evolve so that it can continue to meet the changing needs of consumers, businesses, and communities it serves and so that we maintain the health of a dual banking system,” said Hubbard. “The ability to issue such charters in the federal banking system provides greater choice to banks, businesses, and consumers.”

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