On July 31, 2018, the Office of the Comptroller of the Currency (the “OCC”) announced that it would begin accepting applications for special-purpose national bank charters from certain FinTech companies – including those that do not take deposits.1 The announcement came immediately after the Treasury Department voiced its support for the plan in a 200-page report calling for changes to regulations surrounding FinTech companies and other financial industry innovators,2 and on the heels of the Bureau of Consumer Financial Protection’s appointment of Paul Watkins to lead its newly-created Office of Innovation. Locke Lord Quickstudy “New Kid in the Sandbox: Bureau of Consumer Financial Protection to create FinTech ‘Regulatory Sandbox’”.
Under the OCC’s program, it is expected that FinTech companies receiving this charter will be exempt from many state banking and financial services laws and regulations through qualifying for carve-outs already provided to federally chartered banks.3 In a policy statement accompanying the announcement, the OCC stated that FinTech applicants would be expected to adhere to the “same high standards” that apply to other federally chartered banks. However, the OCC noted that, as it does for all banks under its supervision, it would tailor those standards based on the FinTech applicant’s size, risk profile, and business complexity.4 The OCC also stated that FinTech companies that receive national charters would be supervised like “similarly situated national banks, including with respect to capital, liquidity and risk management.” 5
The announcement comes after nearly two years of debate and controversy following the OCC’s initial announcement in 2016 that it was considering granting charters to FinTech companies. The controversy was exacerbated by two high-profile lawsuits in federal courts in New York and Washington, D.C. brought against the OCC by state financial and banking regulators alleging that implementation of the OCC’s plan would exceed that agency’s authority. Both of those lawsuits were dismissed on ripeness grounds, with the courts concluding that the injuries alleged were too speculative because the OCC had not yet actually issued any FinTech charters.6 Maria Vullo, Superintendent of the New York Department of Financial Services (“DFS”), the state agency that brought the lawsuit in New York federal court, has stated previously that the DFS intends to renew the lawsuit if the OCC moved forward with its plan.7
Given this threat of continued litigation, as well as the fairly arduous, multi-phase application process that FinTech companies seeking a national charter will face, it is not immediately clear if many FinTech companies will seek to become federally chartered under the OCC’s plan. Nor is it apparent which FinTech companies may benefit from receiving a national charter. Nevertheless, this announcement represents an opportunity for many FinTech companies to determine whether a federal charter is a right step for their business, and provides FinTech companies an opportunity to begin engaging with the OCC should they choose to move forward.
6. See Conference of State Bank Supervisors v. Office of the Comptroller of the Currency, et. al., Civ. Action No. 17-0763 (DLF), 2018 WL 2023507 (D.D.C. Apr. 30, 2008); Vullo v. Office of Comptroller of the Currency, 17 Civ. 3574 (NRB), 2017 WL 6512245 (S.D.N.Y. Dec. 12, 2017)
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