January 27, 2022

Volume XII, Number 27

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U.S. District Court for DC Dismisses CSBS' Challenge Regarding Federal Fintech Charter, All Eyes on the OCC

The U.S. District Court for the District of Columbia recently granted the Office of the Comptroller of the Currency’s (“OCC”) motion to dismiss a lawsuit brought by the Conference of State Bank Supervisors (“CSBS”) challenging the OCC’s authority to issue special purpose charters to FinTech companies.  According to the court, the CSBS currently lacks standing to bring the action because the OCC has not to-date issued such a charter.

In a press release about the decision, John Ryan, President and CEO of CSBS, emphasized that the court did not rule on the merits of the case.  Consequently, the CSBS may renew its challenge if and when the OCC issues such a charter. In December 2017, another federal district court dismissed a similar lawsuit brought by the New York Department of Financial Services on the same grounds.  Because the OCC is set to provide additional details about its views concerning the charter by the end of June or July, these legal disputes could restart sometime this summer.  Comptroller of the Currency Joseph Otting has reportedly stated that the OCC has not “concluded” its position and welcomes “people’s feedback.”  In the past, he has appeared to support the concept of a FinTech charter, recognizing the value it might add to the small dollar lending market.

Many FinTech firms have advocated for a federal charter from the OCC to avoid the need to obtain licenses on a state-by-state basis.  Some industry participants believe that such a charter would reduce the burden of regulatory compliance, increase access to capital for underserved consumers, and make the U.S. more competitive with countries that have adopted a more uniform approach to FinTech regulation.  The CSBS and others have argued that FinTech companies are currently subject to the 50-state licensing regime because the National Bank Act does not authorize the OCC to grant such non-depository institutions a national bank charter.  Moreover, they argue that state regulators are working to modernize regulations and to move toward a more integrated system of licensing and oversight.

Copyright 2022 K & L GatesNational Law Review, Volume VIII, Number 128
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About this Author

Daniel Cohen, KL Gates Law Firm, Washington DC, Finance Law Attorney
Associate

Dan Nuñez Cohen is an associate in the firm's Washington, D.C. office. Dan advises and advocates for clients at the intersection of federal legislative and regulatory policy and compliance, focusing on financial services issues affecting depository institutions, trust companies, money services businesses including digital asset exchanges, wallet providers, and token issuers; and the cannabis industry. He has experience assisting with bank charters and money transmitter licenses; counseling clients on compliance with federal banking and trust laws; and advocating for...

202-778-9020
Eric A. Love, KL Gates, Capital Markets Compliance Lawyer, Treasury Legislation Attorney
Law Clerk

Eric A. Love is a member of K&L Gates’ Public Policy and Law Practice and is based in the Washington, D.C. office. Mr. Love focuses on federal legislative and regulatory policy issues related to financial services and capital markets, with a particular emphasis on securities and corporate governance. 

Prior to joining K&L Gates, Mr. Love served as a special assistant in the Office of Legislative Affairs at the U.S. Department of the Treasury. In this capacity, he worked to help advance Treasury’s legislative agenda on a broad portfolio...

202-778-9415
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