NEW YORK—The U.S. District Court for the Southern District of New York has ruled against the Office of the Comptroller of the Currency (OCC) in a dispute over the legality of the regulator's fintech charter.
The court determined that the OCC is prohibited by the National Bank Act from offering a specialized bank charter to a company that doesn't accept deposits.
The OCC has indicated it will appeal the decision.
This lawsuit was the second brought by the New York Department of Financial Services (NYDFS) challenging the OCC's fintech policy; the first one was dismissed for lack of standing because the OCC had yet to finalize or issue any charters. Another lawsuit brought by the Conference of State Bank Supervisors was dismissed earlier this year for similar reasons.
In its second complaint, the NYDFS argued that OCC's fintech policy related to Internet-based financial startups is "lawless, ill-conceived, and destabilizing of financial markets that are properly and most effectively regulated by New York state."
First-of-its-Kind Framework
The OCC's fintech charter establishes a first-of-its kind regulatory framework for fintech companies. The regulator announced in November 2018 that a number of fintechs had explored applications for the charters.
In its analysis, NAFCU noted it acknowledges the benefits of fintech and last month released a new whitepaper that charts a path toward regulatory coordination between traditional financial institutions and fintech companies. The association shared the recommendations directly with leaders of the NCUA, CFPB, Federal Reserve, and Treasury Department.