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OCC Moves to Dismiss NY DFS Lawsuit Challenging Fintech Charter; More Filings in CSBS Lawsuit Challenging Fintech Charter

As expected, the OCC filed a motion to dismiss the second lawsuit filed by the New York Department of Financial Services (DFS) in a New York federal district court to block the OCC’s issuance of special purpose national bank (SPNB) charters to fintech companies.  The OCC also filed a reply brief in support of its motion to dismiss the second lawsuit filed by the Conference of State Bank Supervisors (CSBS) in a D.C. federal district court to stop the OCC from issuing SPNB charters and CSBS filed a reply brief in support of its alternative motion for leave to conduct jurisdictional discovery.

DFS Lawsuit.  The OCC’s motion to dismiss the DFS lawsuit essentially replicates its motion to dismiss the CSBS lawsuit.  In addition to arguing that DFS’s complaint fails to state a claim because the OCC’s interpretation of the term “business of banking” in the National Bank Act is entitled to deference, the OCC argues that the court lacks subject matter jurisdiction over DFS’s claims because:

  • DFS cannot have standing to sue until the OCC approves an application for an SPNB charter because only then could DFS suffer an injury in fact.

  • Because the OCC has not “even received [an application for an SPNB charter], let alone granted a charter,” the matter is not ripe for judicial review.

CSBS Lawsuit.  In its reply brief in support of its motion to dismiss CSBS’s lawsuit, the OCC reinforces the arguments made in its motion to dismiss regarding lack of standing and ripeness and the reasonable of its interpretation of “business of banking.”  CSBS, in its reply brief in support of its motion for alternative discovery, renews its arguments that the discovery it seeks will establish future injury under the “impending injury and “substantial risk” tests “by showing exactly where the OCC stands on the path towards issuing a charter (to the extent the Court has any doubts.)”

CSBS had asked the court to allow it “to conduct jurisdictional discovery because it will allow CSBS to supplement its jurisdictional allegations to establish standing and ripeness—specifically, to resolve factual disputes concerning the status of OCC’s implementation of the [SBNB charter] Program (to the extent the Court finds the current allegations insufficient.)”  In opposing the motion, the OCC argued that such discovery was unnecessary because CSBS cannot establish that any of its members have suffered an injury until an SPNB charter is finally approved and whether a charter application has been filed or a charter has been granted is a matter of public record.  In its reply brief, CSBS calls the OCC’s position “entirely wrong,” asserting that “to the extent that the Court has any reservations about CSBS’s showing, discovery will reveal exactly how close OCC is to [the point of deciding to grant a charter to a particular fintech company], if it has not already reached it.”

The OCC had also argued that the discovery sought by CSBS would chill companies interested in an SPNB charter from pursuing discussions with the OCC.  CSBS calls these concerns “wild speculation” and asserts that even if they deserve attention, “they would only be enough to support a protective order or alternative procedure, not outright denial of discovery.”  CSBS further states that “it certainly would be willing to work with the OCC (like any party to a discovery dispute) to identity methods to address any of OCC’s more precisely articulated and justified concerns—for example by potentially accepting anonymized data, redacted versions of documents, summary data or, in extreme cases, information marked attorneys’ eyes only.”

Copyright © by Ballard Spahr LLP

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About this Author

Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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