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OCC Fintech Charter Plan Attracts another Big Critic

The Office of the Comptroller of the Currency faces more resistance to its plan to enable fintech companies to become special purpose national banks. The Conference of State Bank Supervisors has filed suit in the U.S. District Court for the District of Columbia challenging the proposal.

The suit claims that the OCC’s plan exceeds the agency’s authority under the National Bank Act and related federal laws. “The OCC’s action is an unprecedented, unlawful expansion of the chartering authority given to it by Congress for national banks. If Congress had intended it to be used for another purpose, it would have explicitly authorized the OCC to do so,” said John W. Ryan, CSBS president and CEO. “If the OCC is allowed to proceed with the creation of a special purpose nonbank charter, it will set a dangerous precedent that any federal agency can act beyond the legal limits of its authority. We are confident that we will prevail on the merits.”

The OCC on Dec. 2, 2016, released a proposal for awarding special purpose national bank charters to fintech firms if they fulfill multiple requirements, including performing “core banking services” defined as receiving deposits, paying checks or lending money. The idea is to promote financial inclusion and regulatory consistency, and to strengthen the federal banking system, among other goals, the OCC said. On March 15, the agency released a 24-page supplement, which discusses how the agency will supervise fintech firms that become banks.

State regulators, Democratic U.S. senators and community bankers have criticized the proposal for a new fintech charter. New York State Department of Financial Services (NYDFS) Superintendent Maria Vullo in January questioned why the OCC wanted to charter fintech firms given that the agency had not identified any deficiencies at the state level to justify those charters.

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