NEW YORK–A U.S. federal court here has ruled it has the authority to hear a challenge by the New York Department of Financial Services to the Office of the Comptroller of the Currency’s plan to issue special-purpose national bank (“SPNB”) charters to fintechs.
The DFS is claiming the OCC’s plan to grant so-called “fintech charters” violates the federal banking regulator’s statutory authority to license national banks in the business of banking, because OCC contemplated issuing SPNB charters to entities that did not accept deposits. DFS has also argued the OCC’s action violated the U.S. Constitution, constituting a preemption of state law that was not authorized by Congress.
According to documents filed by the DFS in the case, the OCC said by applying its "...uniform supervision over national banks, including fintech companies, [would] help promote consistency in the application of law and regulation across the country and ensure that consumers [we]re treated fairly.”
Why Fintechs Want New Charter
Fintech companies, including those in the cryptocurrency trading and custody business, have sought an SPNB charter they believe would eliminate the necessity of applying state-by-state for money transmitter and equivalent licenses.
The DFS filed its lawsuit against OCC in September 2018 and OCC moved to dismiss DFS’s complaint several months later, claiming that the court had no jurisdiction over the matter because it was not ripe for adjudication.
As CUToday.info reported earlier, the OCC finalized its SPNB charter program for fintech companies and announced it would accept qualifying applications beginning July 2018.
One Motion to Dismiss Approved
The court has now ruled in the current matter that DFS has satisfactorily demonstrated there is now “substantial risk that harm will occur” if SPNB charters were granted, mainly that state oversight of non-depository money transmitters could be eliminated and DFS could lose substantial revenue if current DFS-regulated entities give up their NY licenses for OCC licenses.
The court did grant OCC’s motion to dismiss the part of DFS’s complaint based on constitutional grounds.