NY Lawsuit Against FinTech Banking Licenses Can Proceed

Regulators from New York got the nod from a judge to move forward with their lawsuit aimed at stopping FinTechs from offering banking services on a national level.

According to a report in MarketWatch citing court proceedings, Manhattan Federal Judge Victor Marrero ruled Thursday (May 3) the New York State Department of Financial Services can move forward with its lawsuit against the Office of Comptroller of the Currency. Regulators in New York want to prevent federal government agencies from granting FinTechs national licenses enabling them to loan and send money like a bank. In order for the FinTechs to do that, they need to get state licenses. The OCC licenses would allow FinTechs to lend money and pay checks nationally. The FinTechs wouldn’t be able to accept bank deposits. The licenses are easier for the FinTechs to get and are aimed at enabling them to serve the unbanked. New York State regulators argue it could result in predatory lenders that would hurt consumers if it can oversee these FinTechs with a national license.

The lawsuit and ruling come as the FinTech market place is on fire, disrupting traditional financial services along the way.  The judge ruled New York State Department of Financial Services can move ahead on two of the three counts, noted the report. “Today’s decision by the court is a resounding triumph for consumers and the regulated banking industry — not just in New York, but across the nation,” Linda Lacewell, acting financial services superintendent, said in a statement to MarketWatch.

New York State Department of Financial Services launched a lawsuit against the OCC in September in an effort to block any charters in the state. The regulator contended in the lawsuit the OCC is going beyond its powers when it created the charter program for FinTechs. The Judge ruled Thursday that wording in the statute makes it clear that depository institutions are the only ones that can receive a national bank charter from the OCC.