NYDFS counters OCC’s arguments in fintech charter challenge appeal

Courts NYDFS OCC Appellate Second Circuit Fintech Charter State Issues

On July 23, NYDFS filed its opening brief in the appeal of its challenge to the OCC’s decision to allow non-depository fintech companies to apply for Special Purpose National Bank charters (SPNB charter). The OCC filed its opening brief with the U.S Court of Appeals for the Second Circuit in April (covered by InfoBytes here), appealing the district court’s final judgment in favor of NYDFS, which ruled 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.

In its brief, NYDFS argued that the district court was “correct to hold that the OCC had exceeded its statutory authority. . .in deciding to issue federal bank charters to nondepository fintech companies.” In response to the OCC’s arguments that NYDFS lacked standing and that the claims were not ripe, NYDFS first stated that “standing and ripeness exist not only when injury has already occurred, but also when it is imminent or when there is a substantial risk of harm.” Specifically, NYDFS asserted that its claims are ripe because (i) the OCC has actively solicited charter applications from the fintech industry and has indicated that companies had started the application process; and (ii) “one of the OCC’s stated objectives in the Fintech Charter Decision is to allow fintech companies that receive [an SPNB charter] to escape state regulation.” NYDFS also argued that because nondepository institutions are not engaged in the “business of banking” within the meaning of the National Bank Act (NBA), they cannot receive federal bank charters. Moreover, it contended that “when Congress did intend to extend OCC’s regulatory jurisdiction over such institutions, it expressly amended the NBA to do so.” Among other arguments, NYDFS claimed it is entitled to nationwide relief, stating that the district court merely granted the relief afforded under the Administrative Procedure Act, which specifies that the proper remedy for when an agency’s actions are contrary to law and “‘in excess of statutory jurisdiction, authority, or limitations” is to set aside the regulation.

Additionally, several parties, including the Conference of State Bank Supervisors and the Independent Community Bankers of America, filed separate amicus briefs (see here and here) in support of NYDFS, arguing that the OCC lacks the authority to grant SPNB charters.