On April 30, 2018, the U.S. District Court for the District of Columbia dismissed the lawsuit filed by the Conference of State Bank Supervisors (CSBS) in April 2017 challenging the Office of the Comptroller of the Currency’s (OCC) authority to grant special purpose national bank (SPNB) charters to nondepository fintech companies. The dismissal comes after the U.S. District Court for the Southern District of New York in December 2017 dismissed a similar lawsuit filed by the New York State Department of Financial Services (NYSDFS) that also challenged the OCC’s authority to grant SPNB charters.
The U.S. District Court for the District of Columbia found that the CSBS had failed to establish any injury in fact necessary for Article III standing and that the case was not ripe for judicial review. These were the same grounds on which the U.S. District Court for the Southern District of New York dismissed the NYSDFS lawsuit. The District Court found that CSBS “fails to plead an injury that is ‘certainly impending’ or that exposes its members to a ‘substantial risk,’” because each of the harms alleged by CSBS is contingent on whether the OCC charters a fintech company. The District Court observed that several contingent and speculative events must occur before the OCC charters a fintech company: (1) the OCC must decide to finalize a procedure for handling those applications; (2) a fintech company must choose to apply for a charter; (3) the particular fintech company must substantively satisfy regulatory requirements; and (4) the OCC must decide to grant the charter to the particular fintech company. No such charter has been issued, and the District Court found that CSBS has failed to allege that the OCC will issue a charter imminently or that the OCC’s preliminary activities expose its members to a substantial risk of harm. However, the District Court noted that “[t]here is no doubt that if the OCC were to charter a Fintech, then that national charter would preempt conflicting state laws – even the OCC concedes as much,” and that at that point, the impacted state could allege an injury in fact.
The District Court concluded that the CSBS’s claims also were not constitutionally or prudentially ripe for determination. According to the District Court, this case is constitutionally unripe because the CSBS has not established injury in fact, as discussed above. In its decision, the District Court also determined that this case “would benefit from a more concrete setting and additional percolation.” In particular, the District Court found that the case “will be sharpened if the OCC charters a particular Fintech – or decides to do so imminently.” According to the District Court, “[c]ourts are ill-equipped to prospectively draw lines as to which hypothetical Fintechs, if any, may be chartered. While a court could readily consider the legality of awarding a charter to a particular Fintech, the current dispute does not present that question.” With respect to the CSBS’s request for the District Court to review the OCC’s procedures, the District Court observed that any procedures that may lead to issuing a fintech charter have yet to be finalized. Furthermore, in light of the recent leadership changes at the OCC, the District Court determined that “it is particularly speculative to guess whether the OCC will continue down paths considered by a previous Comptroller. The OCC may pursue similar ends through different regulatory means, or the OCC may choose not to move forward with a national charter program for Fintechs.” Accordingly, the District Court found that the OCC’s actions are not yet sufficiently settled to be fit for review. If the OCC elects to adopt and apply a regulatory scheme to a particular fintech charter, then the District Court would find that agency action to be sufficiently settled and courts would have a more concrete setting to resolve the legal disputes.
Finally, the District Court found that the CSBS had failed to show that delay in obtaining a decision would cause it hardship. Instead, the District Court observed that there would be “hardship to the OCC if each minor step towards a potential agency policy were litigated one-by-one as the policy becomes more settled.”