OCC Files Motion Seeking Dismissal of NYDFS Fintech Challenge

Fintech Courts OCC NYDFS Litigation Fintech Charter

On August 18, the OCC filed a motion in the U.S. District Court for the Southern District of New York to dismiss a lawsuit brought by the New York Department of Financial Services (NYDFS) challenging the OCC’s fintech charter, which would allow the OCC to consider applications from fintech firms for Special Purpose National Bank Charters (SPNB). See Vullo v. Office of the Comptroller of the Currency, Case 17-cv-03574 (S.D.N.Y., Aug. 18, 2017). In a memorandum supporting its motion to dismiss, the OCC argued that the case is not ready for judicial review because NYDFS’ claims that the charter is unlawful and would grant preemptive powers over state law are “contingent on future actions that [the] OCC might or might not take.” Therefore, because NYDFS “cannot point to any injury-in-fact that it has suffered as a result of [the] OCC’s purported actions . . . all of the potential injuries . . . are future-oriented and speculative, and therefore insufficient to confer standing.” Citing Lujan v. Defenders of Wildlife, the OCC asserted that injury must be “likely”—not just “speculative” in nature.

The OCC additionally contended that NYDFS’ challenge lacks standing because:

• The matter fails to meet the fitness and hardship prongs for ripeness and lacks evidence of concrete hardship: (i) the fitness prong is not met because the OCC’s inquiry regarding whether to offer SPNB Charters is ongoing and it has not decided whether it will accept applications for the charters; and (ii) the hardship prong is not met because the OCC averred NYDFS “will not suffer any immediate or significant hardship” if the court were to delay review of this matter.
• Any challenge to the OCC’s 2003 amendment to Section 5.20(e)(1) is “time-barred by the statute of limitations applicable to civil actions against federal agencies.” Furthermore, “[i]nsofar as the adoption of the amendment . . . constitutes a final agency action that [NYDFS] seeks to challenge here, any cause of action would have accrued on January 16, 2004, when the Final Rule became effective. 68 Fed. Reg. 70122 (Dec. 17, 2003). Accordingly, the time for filing a facial challenge to the regulation expired on January 16, 2010.”
• NYDFS’ complaint fails to state a claim on which relief may be granted because the OCC would have had to have issued Section 5.20(e)(1) charters—non-finalized policy statements and requests for public input alone are insufficient to satisfy the “final agency action” requirement needed to give rise to a claim under the Administrative Procedure Act. The OCC asserted it has not completed its decision-making process and that its actions have not affected rights or obligations or resulted in legal consequences.

• Under the National Bank Act, the OCC’s interpretation of “the business of banking”—in which a special purpose bank “must conduct at least one of the following three core banking functions: receiving deposits; paying checks; or lending money”—deserves Chevron deference.
• The OCC has statutory and constitutional authority to issue a Section 5.20(e)(1) charter because: (i) the limited judicial authority cited by the DFS is not entitled to weight; (ii) the historical understanding of “bank” is consistent with the OCC’s interpretation; and (iii) any SPNB charters issued to fintechs pursuant to Section 5.20(e)(1) would not violate the Tenth Amendment.

See additional InfoBytes coverage on NYDFS’s challenge to the OCC’s special purpose fintech charter here and here.