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Financial Services Law Insights and Observations

OCC appeals judgment in NYDFS fintech charter challenge

Courts OCC Appellate Second Circuit NYDFS Fintech Charter Fintech


On April 23, the OCC filed its opening brief in the U.S. Court of Appeals for the Second Circuit to appeal a district court’s final judgment in an NYDFS lawsuit that challenged the agency’s decision to allow non-depository fintech companies to apply for Special Purpose National Bank charters (SPNB charter). As previously covered by InfoBytes, last October the district court entered final judgment in favor of NYDFS, ruling that the SPNB regulation should be “set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,” rather than only those that have a nexus to New York State. The judgment followed the court’s denial of the OCC’s motion to dismiss last May (covered by InfoBytes here), in which the court concluded, among other things, that 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, and that engaging in the “business of banking” under the National Bank Act (NBA) “unambiguously requires receiving deposits as an aspect of the business.” Highlights of the OCC’s appeal include:

  • The OCC claims that NYDFS lacks standing and that its claims are unripe because its alleged injuries are premised on a non-depository fintech company receiving a SPNB charter and commencing business in the state. However, the OCC has yet to receive even an application. The OCC also argues that NYDFS “would not be prejudiced by waiting to resolve these claims until OCC takes affirmative steps to approve an application” because the period between preliminary conditional approval and final approval would provide “ample opportunity to challenge such an application.”
  • The OCC argues that the district court erred in holding that the agency’s decision to accept SPNB charter applications from non-depository fintechs was not entitled to Chevron deference. Specifically, the term “business of banking” under the NBA is “ambiguous” on whether it requires deposit-taking, and the OCC’s resolution of that ambiguity is reasonable as it is consistent with U.S. Supreme Court case law.
  • The OCC argues that even if NYDFS’s claims were justiciable (and even if the OCC’s interpretation was not entitled to Chevron deference), any relief NYDFS is entitled to receive must be limited to the state. The OCC contends that the district court’s decision to grant nationwide relief was improper because it is inconsistent with Article III, which establishes that “remedies should not extend beyond what is necessary to redress the plaintiff’s alleged injuries,” as well as equitable principles and the Administrative Procedure Act.
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