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Financial Services Law Insights and Observations

District Court enters final judgment: Only depository institutions can receive OCC fintech charter

Courts Fintech OCC NYDFS Fintech Charter State Issues National Bank Act Preemption

Courts

On October 21, the U.S. District Court for the Southern District of New York entered a final judgment in NYDFS’s lawsuit against the OCC challenging the agency’s Special Purpose National Bank Charter (SPNB), concluding that the regulation should be “set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits.” As previously covered by InfoBytes, in May the district court denied the OCC’s motion to dismiss the complaint by NYDFS, which argued that the agency’s decision to allow fintech companies to apply for a SPNB is a move that will destabilize financial markets more effectively regulated by the state. The court stated that because the OCC failed to rebut NYDFS’s claims that the proposed national fintech charter posed a threat to the state’s ability to establish its own laws and regulations, the challenge “is ripe for adjudication.” After the May decision, the OCC informed the court that it would be seeking final judgment in the case, and on October 7, each party submitted proposed final orders (available here and here). The proposals were “nearly identical,” according to the court, as both (i) “direct the Clerk of Court to enter final judgment in favor of plaintiff [NYDFS] and close the case,” and (ii) “provide that each party shall bear its own fees and costs.” However, NYDFS proposed “that the regulation be ‘set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,’” while the OCC suggested the regulation only be set aside “‘with respect to all fintech applicants seeking a national bank charter that do not accept deposits, and that have a nexus to New York State…in a manner that would subject them to regulation by [NYDFS].’” The court agreed with NYDFS, concluding that the OCC “failed to identify a persuasive reason to deviate from ordinary administrative law procedure,” which requires “vacatur” of the regulation.  

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