NY DFS Takes OCC to Court over FinTech Charter

The New York State Department of Financial Services ("DFS") filed a Complaint to stop the Office of the Comptroller of the Currency ("OCC") from accepting special purpose national bank charter applications from FinTech companies. The two complaints previously filed by state regulators against the OCC on this matter were dismissed, since the OCC had not attempted to offer the charters at the time. The OCC has since begun to consider applications on these charters.

In the Complaint filed in the U.S. District Court for the Southern District of New York, the DFS alleges that the offering of these charters (i) "grossly exceeds" the OCC's statutory authority and (ii) poses a threat to New York consumers and businesses, since the charters would supersede state law. The DFS claims that the OCC is authorized to issue charters to institutions that engage only in the "business of banking" (i.e., in activities that at a minimum require receiving deposits), and that a special purpose charter for non-banks would require specific Congressional approval. Additionally, the DFS argued that (i) such a charter could be extended to a wide variety of service providers, given the ambiguous definition of "FinTech" and (ii) a federal regime will preempt states' ability to regulate FinTech banks.