Bank Regulator Seeks Dismissal of New York’s Fintech Challenge

By Chris Bruce

A federal bank regulator Aug. 18 asked a judge to dismiss a fintech challenge by the New York Department of Financial Services (NYDFS), saying New York hasn’t shown it’s been harmed.

NYDFS Superintendent Maria T. Vullo sued the Office of the Comptroller of the Currency in May, saying an OCC regulatory initiative that could lead to special charters for fintech firms is unlawful and exceeds the agency’s powers ( Vullo v. Office of the Comptroller of the Currency , S.D.N.Y., 17-cv-03574, motion to dismiss 8/18/17 ).

The suit said the OCC’s efforts so far amount to final action that’s subject to challenge in court, but the agency disagreed in a brief that accompanied its motion to dismiss, saying the NYDFS lacks standing to bring its suit because it hasn’t shown injury. “Put simply, DFS cannot establish standing because OCC has yet to take any relevant action that could have a concrete effect of any kind,” the agency said.

The OCC also said it hasn’t made a final decision on the charter question at issue in the suit – whether it will offer a special charter for fintech firms - and said the New York lawsuit is barred by a statute of limitations. Even if the court decides to reach the merits of the challenge, the OCC added, its interpretation of its rules deserves deference from the court.

Special Purpose Banks

At issue in the case are OCC regulations found under 12 C.F.R. Part 5 that allow the OCC to charter special purpose national banks. In general, the chartering authority, set out in 2003 amendments to the rules, says a special purpose bank must engage in at least one of three “core banking functions” – accepting deposits, paying checks, or lending money.

According to the OCC’s Aug. 18 filing, the New York suit claims that the 2003 amendments, a speech by former Comptroller Thomas J. Curry, and two March 2017 regulatory issuances by the OCC — a statement on a fintech-related white paper and a draft addition to the OCC’s licensing manual on evaluating fintech charter applications — amount to final agency action on fintech that can be challenged under the Administrative Procedure Act.

The OCC disagreed, saying the case isn’t ready for review by a court. Even if New York could point to some injury it might suffer, the agency said, any such injuries “are contingent on future actions that OCC might or might not take.”

Earlier in August, the OCC asked a federal judge in Washington to dismiss a similar but separate challenge brought by the Conference of State Bank Supervisors, the trade association for state bank regulators. The case in New York and the CSBS case in Washington both say the OCC lacks authority to approve charters for special purpose national banks that don’t accept deposits.

The case brought by the NYDFS is in the U.S. District Court for the Southern District of New York. The OCC is represented by acting U.S. Attorney for the Southern District Joon H. Kim.

To contact the reporter on this story: Chris Bruce in Washington at

To contact the editor responsible for this story: Michael Ferullo at

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