State Banking Regulators Challenge OCC's Nonbank Charter Program

Blockchain & E-Transactions Law

On October 25, 2018, the Conference of State Bank Supervisors (CSBS) filed suit in the U.S. District Court for the District of Columbia challenging the Office of the Comptroller of the Currency's (OCC) creation of a new national bank charter for nonbank companies, which would include FinTech companies (the Nonbank Charter Program). See Conference of State Bank Supervisors v. Office of the Comptroller of the Currency, Case 1:18-cv-02449-DLF (D.D.C. Oct. 25, 2018).

In the complaint, the CSBS alleges that nonbank institutions-including FinTech companies-have been subject to state regulation for decades, and the Nonbank Charter Program would preempt the licensing, regulation, and supervision responsibilities that state authorities have exercised over nonbank institutions. The national bank charter is intended for nondepository institutions, and the CSBS alleges that the OCC is authorized to charter only those institutions that carry on the "business of banking." Pursuant to the National Bank Act, the CSBS argues, the "business of banking" requires engaging in receiving deposits. Thus, the CSBS alleges that by creating a national bank charter for nondepository institutions, the OCC has exceeded its authority to charter only those institutions that carry on the "business of banking" or special purposes expressly authorized by Congress. The CSBS also takes issue with the fact that the OCC created the nonbank charter without undertaking a preemption determination and providing interested parties the opportunity to comment. The lawsuit seeks a declaratory judgment and injunction.

The CSBS previously filed suit challenging the Nonbank Charter Program on April 26, 2017, but the court dismissed the complaint finding that the CSBS lacked Article III standing because there was not an impending or substantial risk of injury. See Conference of State Bank Supervisors v. Office of the Comptroller of Currency, 313 F. Supp. 3d 285, 294 (D.D.C. 2018). The court also held that the disputes were not constitutionally or prudentially ripe for determination. Id. at 299. The CSBS seeks to overcome these hurdles in the current lawsuit because the OCC announced in July 2018 that it would begin accepting applications for nonbank charters from FinTech companies, and companies may have already applied.

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