The Conference of State Bank Supervisors (CSBS) filed suit against the Office of the Comptroller of the Currency (OCC) in late April, alleging that the OCC's decision that it is empowered to create a charter for nonbank financial services providers is "far beyond the limited authority granted to it by Congress under the National Bank Act and other federal banking laws." The CSBS further alleges that because the OCC has acted beyond its statutory authority, it has violated the Administrative Procedure Act (APA).

In December 2016, the OCC announced it would move forward with considering applications from nonbank financial technology (fintech) companies to become special-purpose national banks. National bank status offers a number of advantages for fintech companies, including the prestige of operating as a national bank, authority to conduct activities on a nationwide basis, preemption of state licensing and usury laws, and a single primary regulator. For more information on the OCC's fintech charter proposal, please see our prior article.

According to the CSBS's complaint, filed on April 26, 2017, the OCC's decision that it has the ability to create special-purpose charters for fintech companies would pull chartered nonbank fintech companies into the national banking regulatory system, potentially preempting and replacing the licensing, regulation, and supervision responsibilities of state authorities. The CSBS is concerned that the OCC's creation of a nonbank charter program will allow chartered entities to operate outside the bounds of existing state regulation, thus creating conflicts between state and federal law. The complaint echoes earlier criticisms the CSBS levied against the OCC's proposal in a letter sent to the OCC in January.

In total, the complaint alleges five causes of action:

  • Count I: The OCC exceeded its statutory authority because it does not have the ability to provide a charter to nondepository entities.
  • Count II: The OCC's promulgation of regulation 12 C.F.R. § 5.20(e)(1), permitting the OCC to charter special-purpose national banks, exceeds its statutory authority under the Non-disclosure agreement.
  • Count III: The OCC's decision to grant fintech charters failed to comply with the rulemaking requirements of the APA.
  • Count IV: The OCC's fintech charter decision is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
  • Count V: The OCC's decision to grant bank charters to fintech companies violates Article VI, clause 2 (Supremacy Clause) and the Tenth Amendment of the U.S. Constitution by preempting otherwise applicable state law without statutory authority.

CSBS is seeking a declaratory judgment stating that the OCC's creation of the fintech charter is unlawful and a decision enjoining the OCC from further pursuing the program. The lawsuit was filed in the U.S. District Court for the District of Columbia, and is assigned to Judge James E. Boasberg. The case is Conf. of State Bank Supervisors v. Office of the Comptroller of the Currency, D.D.C., 17-cv-00763.