State Regulators Fintech Charter Suit Filed Too Soon, Judge Says

By Evan Weinberger

State banking regulators saw their challenge to an Office of the Comptroller of the Currency proposal to offer charters to financial technology firms dismissed because a federal judge ruled that the time was not right to hear the regulators’ lawsuit.

Because the OCC had not yet finalized its plans for a fintech charter and not issued one, the Conference of State Bank Supervisors (CSBS) filed its lawsuit before the claims were ripe, Judge Dabney L. Friedrich of the U.S. District Court for the District of Columbia ruled on April 30.

“This dispute would benefit from a more concrete setting and additional percolation. In particular, this dispute will be sharpened if the OCC charters a particular fintech — or decides to do so imminently,” Friedrich wrote.

The OCC, which supervises national banks, began developing a special purpose national charter for fintech firms in 2016 under former Comptroller Thomas Curry, an Obama appointee. The charter would allow marketplace lenders, payments processors, and other financial technology firms to operate nationwide without getting licensed in each state.

Charter Decision Soon

Comptroller Joseph Otting has embraced the idea of a fintech charter but has yet to make a decision about whether the OCC will begin offering them. Otting told an industry conference April 16 that he will have a decision early this summer.

State regulators argue that the fintech charter would eliminate their power to oversee fintech firms, many of which already operate with state licenses.

The CSBS, an umbrella group of state banking regulators, filed its lawsuit in April 2017.

The complaint alleges that the OCC does not have the authority to issue a fintech charter and that the OCC did not follow appropriate notice and comment requirements when it issued a series of white papers and other documents related to the potential new charter, among other claims.

The CSBS may ultimately have standing to bring its case on behalf of its members, but it can’t point to imminent harm at this point because no charters have been issued, Friedrich said.

“This chain of speculative events that must take place before a CSBS member is injured fails to clear the bar posed by either the ‘certainly impending’ test or the ‘substantial risk’ test. The possibility of future injury is too attenuated and uncertain to be ‘certainly impending,’” she wrote.

However, Friedrich did not rule on the merits of the CSBS case, allowing the state regulators to potentially bring a case again once the OCC decides on its path forward with the fintech charter.

In the meantime, state regulators will continue to reshape their supervisory efforts to better oversee fintech firms, CSBS Chief Executive John Ryan said in a May 1 statement.

“State regulators continue to supervise a vibrant financial services market of banks and nonbanks alike, promoting access to innovative products while ensuring consumer protection,” Ryan’s statement said.

Bryan Hubbard, a spokesman for the OCC, declined to comment on the decision and said in an email to Bloomberg Law that he had no update on when Otting would decide whether to move forward with the fintech charter.

Any company that gets a fintech charter should expect tight supervision, Hubbard said.

“If the agency does move forward to exercise its authority to issue special purpose national bank charters to qualifying nondepository financial technology companies engaged in the business of banking, the resulting bank would be supervised as other similarly situated banks with appropriate requirements for capital, liquidity and meeting the financial needs of its customers,” he said.

A lawsuit filed by the New York Department of Financial Services suffered a similar fate Dec. 12, 2017.

The case is Conference of State Bank Supervisors v. Office of Comptroller of Currency , D.D.C., No. 17-0763, 5/1/18 .

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

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