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CSBS drops suit against OCC fintech charter after revised application

State Issues Courts CSBS OCC Fintech Bank Regulatory Bank Charter National Bank Act Nonbank FDIC

State Issues

On January 13, the Conference of State Bank Supervisors (CSBS) announced that it has withdrawn its complaint challenging the OCC’s Special Purpose National Bank (SPNB) Charters and a financial services provider’s application for an OCC nonbank charter. CSBS filed a notice of voluntary dismissal without prejudice in the U.S. District Court for the District of Columbia asking the court to close the case. According to its press release, CSBS voluntarily took this action after the company, which had previously filed an application for an OCC SPNB charter, “amended its application to include seeking FDIC deposit insurance, thus complying with the legal requirement that national banks obtain federal deposit insurance before operating as a bank.”

As previously covered by InfoBytes, CSBS filed a complaint in December 2020, to oppose the OCC’s potential approval of the company’s SPNB charter application. CSBS argued that the company was applying for the OCC’s nonbank charter, which was invalidated by the U.S. District Court for the Southern District of New York in October 2019 (the court concluded that the OCC’s SPNB charter should be “set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,” covered by InfoBytes here). At the time, CSBS argued that “by accepting and imminently approving” the company’s application, the “OCC has gone far beyond the limited chartering authority granted to it by Congress under the National Bank Act (NBA) and other federal banking laws,” as the company is not engaged in the “business of banking.” CSBS sought to, among other things, have the court declare the agency’s nonbank charter program unlawful and prohibit the approval of the company’s charter under the NBA without obtaining FDIC insurance.

OCC acting Comptroller of the Currency Michael J. Hsu issued a statement following the withdrawal of the legal challenge. “We must modernize the regulatory perimeter as a prerequisite to conducting business as usual with firms interested in novel activities. Modernizing the bank regulatory perimeter cannot be accomplished by simply defining the activities that constitute ‘doing banking,’ but will also require determining what is acceptable activity to be conducted in a bank. Consolidated supervision will help ensure risks do not build outside of the sight and reach of federal regulators.”