Politico, October 25, 2018: State regulators set to renew legal fight over federal charter for fintechs
State bank regulators on Thursday will sue a federal agency that they say is overstepping its bounds by offering national bank charters to financial technology startups.
The Office of the Comptroller of the Currency, which oversees national banks, this summer finalized plans to put forward a limited charter for fintech companies, allowing those firms to operate across state lines without having to comply with each state’s rules.
The charter would be for companies that provide narrowly targeted banking services, such as making loans or paying checks, but that don’t take deposits.
The new legal action by the Conference of State Bank Supervisors could dissuade startups from pursuing a limited charter.
The CSBS tried last year to sue when the charter was still in proposed form, but a federal judge rejected the lawsuit because the federal regulator had yet to issue a charter to a fintech company.
The OCC still hasn’t granted one, but now that the regulator has finalized its plans to offer such charters, CSBS is hoping its suit can move forward, the group told POLITICO.
State regulators’ complaints are substantially the same as before: They contend the OCC does not have the legal authority to charter fintech startups under the National Bank Act, and that it should wait for statutory direction from Congress.
Beyond their legal complaints, the states contend that federal charters give the OCC power to pick winners and losers by providing a stamp of approval to a fintech’s business model.
The OCC, for its part, has argued that the move is necessary as part of keeping its rules up to date with technological changes.
“The federal banking system must continue to evolve and embrace innovation to meet the changing customer needs and serve as a source of strength for the nation’s economy,” Otting said in a statement when he announced the agency would accept applications from fintechs.
