New York Regulator Can Proceed in OCC Lawsuit

May 3, 2019 | News

A district judge recently gave the New York Department of Financial Services (DFS) the green light to sue the Office of the Comptroller of the Currency (OCC) over it fintech charter, arguing that the fintech charter was “ripe for adjudication.”

Judge Victor Marrero of the Southern District of New York said that OCC’s fintech charter threatened New York’s sovereignty. “The threats to New York’s sovereignty are so clear that the OCC does not even mention, let alone contest, the state’s interests,” wrote Judge Marrero. “Instead, OCC focuses exclusively on constitutional and prudential ripeness.”

The OCC had argued earlier in the year that the federal agency’s fintech charter shouldn’t be challenged since it hadn’t received, reviewed, or approved any application from a fintech firm. This argument had worked during a previous DFS challenge in 2017 when a district judge deemed that lawsuit speculative and prudentially unripe.

This time however, the judge disagreed with the OCC’s position, arguing that it had invited discussion from fintech firms. In fact, media reports suggest that Avant, an online lender, is currently in high-level discussions with the OCC over the fintech charter.

The court order read, “This alleged interest, coupled with the common-sense observation that OCC spent numerous years developing the Fintech Charter Decision and coordinating its creation with other federal banking regulators indicates that OCC has the clear expectation of issuing SPNB charters.”

The judge also seems to disagree with the OCC’s position on its authority under the National Banking Act (NBA) to grant charters to fintech firms that are not depository institutions. NBA authorizes the OCC to charter firms that are in the “business of banking,” but the NBA “unambiguously requires receiving deposits as an aspect of the business,” according to the judge Marrero.

Currently, the OCC is facing another lawsuit by the Conference of State Bank Supervisors (CSBS) over the same issue. John Ryan, president and CEO of CSBS, praised the ruling. “As to the similar litigation CSBS has with the OCC, we continue to believe that the OCC has acted outside its congressional mandate in seeking to grant national bank charters to nonbank entities.”

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