State banking authorities have been vocal in their opposition to the proposed new special purpose bank charter intended to support fintech organizations. This week, state regulators backed up their words with a lawsuit. As the American Banker reported:
The OCC’s action is an unprecedented, unlawful expansion of the chartering authority given to it by Congress for national banks,” John Ryan, the president and CEO of the Conference of State Bank Supervisors, said in a press release. “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.”
The suit, filed in U.S. District Court for the District of Columbia, lays out the state regulators’ fundamental complaint that they’ve had from the beginning against the OCC’s charter, namely that the agency does not have statutory authority to create a special-purpose charter.
The OCCs stated goals for the new charter type charter are to 1) provide uniform standards for oversight, 2) give fintech organizations one set of federal rules to follow and 3) provides a pathway for full-service national bank chartering. It doesn’t provide structure around deposit taking and doesn’t provide entry to the FDIC.
The objection that states have with the OCC, beyond the fact that they think it’s an overreach of the OCC’s authority is that it takes away their power to regulate fintechs to their advantage:
… states argue that they are better positioned to observe the risks and opportunities of the growing fintech industry, and that the fintech charter would strip them of their ability to protect consumers within their borders.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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