OCC Requests Pre-Motion Conference to Discuss NYDFS Fintech Challenge

Fintech Agency Rule-Making & Guidance OCC NYDFS National Bank Act Litigation Licensing Fintech Charter

On July 25, acting U.S. Attorney for the Southern District of New York, Joon H. Kim, filed a letter with the federal court in that district on behalf of the OCC, requesting a pre-motion conference to discuss its anticipated motion to dismiss the New York Department of Financial Service’s (NYDFS) suit against the OCC’s special purpose fintech charter. See Vullo v. Office of the Comptroller of the Currency, Case 17-cv-03574 (S.D.N.Y., Jul. 25, 2017). As previously covered in InfoBytes, NYDFS filed the lawsuit May 12 on the grounds that the charter is unlawful and would grant preemptive powers over state law. Kim cites the following three reasons for dismissal of NYDFS’s complaint:

• NYDFS lacks standing to bring the suit because, although the OCC has “publically [sic] contemplated the possibility of issuing fintech charters…those public statements do not amount to a ‘final agency action’ subject to challenge under the [Administrative Procedure Act].” Indeed, since any harm NYDFS can identify is “conjectural or hypothetical,” and it has not suffered any “actual or imminent” injury, the Court lacks subject matter jurisdiction.
• OCC’s interpretation of its statutory authority under the National Bank Act (NBA) refers to Section 5.20(e)(1), which “reasonably limits the issuance of charters to institutions that carry on at least one of three ‘core banking activities’ [such as] the receipt of deposits, the payment of checks, or the lending of money.” Thus, regulations that allow chartering approvals—even if the chartered companies don't take deposits—is reasonable because they carry on at least one core banking function.
• The Supremacy Clause of the U.S. Constitution would protect fintech banks chartered under the relevant OCC rules and entitle them to NBA protections against state interference.   Kim noted that it “is well established that the Supremacy Clause operates in concert with the NBA to displace state laws or state causes of action that conflict with federal law or that prevent or significantly interfere with national bank powers.”

The OCC faces a separate fintech lawsuit in the District Court for the District of Columbia brought by the Conference of State Bank Supervisors. (See previous Special Alert.)