U.S. banking watchdog the Office of the Comptroller of the Currency (OCC) is facing a lawsuit, adding another setback to its struggling effort to provide FinTechs with national banking licenses.
Reports in The Wall Street Journal said on Wednesday (Sept. 12) that the Conference of State Bank Supervisors announced plans to sue the OCC on grounds that the watchdog does not have the authority to provide national licenses to FinTechs. The OCC's initiative, a so-called FinTech charter, would enable FinTechs to operate on a national level instead of requiring them to obtain regulatory approval from each state.
"The OCC does not have the statutory authority to do what they are seeking to do," said the Conference of State Bank Supervisors' Deputy General Counsel Margaret Liu, according to reports.
It is unclear whether a lawsuit against the OCC would be filed before a company applies for the OCC's charter. While the OCC began accepting applications on July 31 of this year, interest in the charter has been limited due to uncertainties over whether the OCC's clearance for FinTechs to operate as national banks would hold up against legal scrutiny. News that the Conference of State Bank Supervisors plans to revive its legal efforts against the OCC's initiative has heightened those anxieties, reports said.
The Conference's previous legal challenge, via a lawsuit filed last year, fell apart after it was "deemed premature," reports said. Concerns center around whether the OCC's approvals would enable FinTechs like Square and LendingClub to hold deposits if they obtain a specialty banking license. Opponents of the OCC's efforts say the ability to hold deposits could allow FinTechs to charge higher interest rates to their customers.
Reports said the OCC plans to "vigorously defend" its ability to charter "companies that are engaged in the business of banking, meet the qualifications for becoming a national bank and apply to conduct business as part of the federal banking system."