Footnotes Trip Up Federal Bank Regulator Fintech Fight With States

By Chris Bruce

The Office of the Comptroller of the Currency July 28 lost its attempt to derail a lawsuit by state bank regulators, over a proposed special charter for fintechs ( Conf. of State Bank Supervisors v. Office of the Comptroller of the Currency , D.D.C., motion to dismiss 7/28/17 ).

Judge James E. Boasberg of the U.S. District Court for the District of Columbia quickly struck the OCC’s motion and ordered the agency to try again by Aug. 2. Boasberg, in an entry on the docket, cited “excessive footnoting” in the OCC’s filing, saying it looks like an effort to avoid page limits. The renewed filing can’t have any more than 10 footnotes, he said.

At issue in the filing itself is an April lawsuit by the Conference of State Bank Supervisors that challenged what it called the OCC’s “recent decision to create a new special-purpose national bank charter” for financial technology companies and other nonbank firms. It said a related December announcement by then-Comptroller Thomas Curry left no doubt that the agency took final action as required before such challenges are allowed.

The OCC disagreed in its July 28 motion to dismiss. It said the CSBS lacks standing because it hasn’t shown it’s been harmed by OCC action. The agency also said it hasn’t yet made any decision on whether it would make such charters available.

“In short, nothing approaching what CSBS has labeled in their Complaint as the OCC’s`Nonbank Charter Decision’ has occurred,” the OCC said in a brief accompanying its motion.

The agency also said the court should dismiss the case even if it reaches the merits of the OCC’s ability to move ahead with the regulation at issue. The agency’s reading of “the business of banking” under the National Bank Act - statutory language that’s important for such charter questions - deserves deference from courts, the brief said.

In addition, the OCC said it already has an important court ruling on its side - a 1987 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that it said confirms the agency’s authority to issue special purpose bank charters. That decision, according to the OCC, “illustrates that the legal concept of a special purpose national bank power is not novel or unprecedented, but rather follows a decades-old OCC practice.”

The case is separate from a similar lawsuit in the Southern District of New York, where New York Department of Financial Services Superintendent Maria T. Vullo has also challenged the OCC. A motion to dismiss is expected in that court soon.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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