New York Bank Regulators Sue OCC on Fintech Initiative

By Chris Bruce

New York bank regulators May 12 mounted the latest court challenge to a federal initiative that could result in special-purpose bank charters for an array of so-called fintech companies ( Vullo v. Office of Comptroller of the Currency , S.D.N.Y., 17-cv-03574, complaint filed 5/12/17 ).

At issue is a March release by the Office of the Comptroller of the Currency of draft revisions to its licensing manual and how those standards might apply to applications by fintech companies — a still-emerging class of non-depository lenders that put a special focus on new technologies.

In a 20-page complaint, New York Department of Financial Services Superintendent Maria T. Vullo asked a federal judge to block the OCC’s effort, saying it “grossly exceeds the agency’s statutory authority.”

According to Vullo, Congress, in the National Bank Act, limited federally chartered banks to the “business of banking,” which includes the taking of deposits--something fintech companies don’t do.

“Accordingly, the Fintech Charter Decision does not concern the `business of banking’ and is therefore beyond the OCC’s jurisdiction to implement,” said the lawsuit in the U.S. District Court for the Southern District of New York.

OCC spokesman Bryan Hubbard May 12 declined to comment on the suit. The OCC took comments on its March initiative until mid-April but has taken no action since that time.

Second Recent Challenge

Vullo’s court challenge follows a lawsuit filed in April that raises a similar challenge. That suit, filed by the Conference of State Bank Supervisors, the trade association for state bank regulators, also said the OCC’s March initiative exceeded the agency’s powers. New York’s Department of Financial Services (DFS) is a CSBS member.

According to Vullo, the OCC’s charter initiative also could hurt New York by giving unscrupulous financial firms “another way to skirt local oversight” by states where they do business. She said the OCC effort would make a wide range of non-depository institutions — including real estate lenders, mortgage servicers, sales and premium finance companies, prepaid card issuers, and others — “purportedly immune” to state oversight by operation of federal preemption.

That would have “unavoidable and drastic consequences” for New York’s DFS, she said, which licenses 288 state and international banks with $2.5 trillion in assets and roughly 600 nonbank financial services firms with assets of approximately $1 trillion.

“New York is a global financial center and, as a result, DFS is effectively a global financial regulator,” the complaint said.

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

To contact the editor on this story: Seth Stern at

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