More legal troubles have emerged for the Office of the Comptroller of the Currency (OCC) over its plan to introduce national bank charters for FinTechs, aimed at making it easier for alternative financial services players to do business.
Reports in Reuters on Thursday (Oct. 25) said the OCC was named as the defendant in a lawsuit filed by the Conference of State Bank Supervisors (CSBS). The body of U.S. state bank regulators said it filed a complaint in the U.S. District Court for the District of Columbia after reports in The Wall Street Journal last month revealed the CSBS’ plans for such a suit.
“Common sense and the law tell us that a non-bank is not a bank,” said CSBS President and CEO John Ryan in a statement announcing the suit. “Thus, CSBS is calling on the courts to stop the unlawful, unwarranted expansion of powers by the OCC.”
The bank charters would allow FinTechs to operate on a national level rather than having to obtain state-level licenses one by one. But legal hurdles have caused some FinTechs to approach the charters cautiously, reports said, while they wait for greater clarity and certainty on the rules.
Previous legal action against the OCC filed last year by the New York Department of Financial Services (NYDFS) and the CSBS were dismissed as premature, reports said. Now, the CSBS and NYDFS are again pursuing legal action following the OCC’s announcement that it would begin issuing the licenses.
The NYDFS filed its lawsuit last month, with Superintendent Maria Vullo slamming the OCC’s initiative as “lawless, ill-conceived and destabilizing of financial markets.”
At the time, Vullo argued that national bank charters for FinTechs would heighten consumers’ risk of exploitation and lead to more “too big to fail” financial institutions. In July, the NYDFS released a report urging online marketplace lenders to have the same level of scrutiny and regulations placed upon them that traditional banks face.