State banking officials are suing the Office of the Comptroller of the Currency (OCC) over its plan to create a special purpose national bank charter for FinTech firms. The Conference of State Bank Supervisors (CSBS) claims the plan violates federal banking law, according to The National Law Journal.
In December 2016, the OCC – an independent bureau under the US Treasury – revealed it would consider applications from FinTech companies to become special purpose national banks. In March this year, the body issued draft guidelines for these FinTech bank charters.
The suit, filed in federal district court in Washington, D.C., claims the OCC, an independent bureau within the U.S. Department of the Treasury, does not have the authority, according to the National Bank Act. The state officials said the OCC needs Congressional approval for a special purpose charter.
OCC Seeks To Help FIntech Firms
The suit claims the OCC is trying to issue a charter to entities that don’t engage in the “business of banking,” which is something that courts have ruled against.
According to a draft of the proposal published in March, the OCC wants to charter fintech firms in the “business of banking” without including institutions that receive deposits.
Margaret Liu, deputy general counsel for CSBS, saw significant harm for consumers and for the marketplace from the plan.
CSBS Submits Objections
CSBS sent a letter during the comment period on the OCC draft guidelines for fintech charters. Liu said her organization opted to sue because it did not believe its concerns would be heard via the comments it submitted. She said the OCC has no obligation to respond to the comments CSBS submitted.
John Ryan, president and CEO of CSBS, wrote that if Congress intended for the OCC to charter national nonbanks, it would have granted the authorization granting special purpose nonbank charters as well as how federal banking laws applied to nonbanks. He said the OCC is wrong in asserting a nondepository institution becomes a national bank, subject to the federal supervision that applies to all national banks, once it receives OCC approval for a nonbank charter.
The OCC believes making special purpose national bank (SPNB) charters available to qualified fintech companies would be in the public interest. An SPNB charter provides a framework of uniform standards and supervision for companies that qualify.
CSBS: A Dangerous Precedent
The CSBS released a statement stating that the OCC will set a dangerous precedent that any federal agency can act beyond its the authority should it be able to create a special purpose nonbank charter.
Bill Grassano, an OCC spokesman, said OCC does not comment on pending or active litigation.
Maria Vullo, New York State Department of Financial Services superintendent, supported the lawsuit. She said the creation of an OCC national charter will suppress and not encourage innovation. She said it would be a way for large, dominant firms to control the development of technology for the financial services industry and harm the existing community banks and small firms working to serve local communities.Get Exclusive Crypto Analysis by Professional Traders and Investors on Hacked.com. Sign up now and get the first month for free. Click here.