On December 12, a federal judge dismissed a challenge to the Office of the Comptroller of the Currency’s proposal to issue special purpose national bank charters to financial technology firms, finding that the plaintiff – the New York State Department of Financial Services – lacks standing and that the claims asserted are not ripe because the OCC’s proposal is not yet final.

The OCC’s proposal emerged from an initiative to promote innovation in the financial services industry. In August 2015, the OCC announced its intent to develop a “framework to evaluate new and innovative financial products and services.”[1] According to the OCC, that effort was necessary because of the perception, shared by many fintech firms, that it is “too difficult to get new ideas through the regulatory approval process.”[2]

In September 2016, the OCC announced that, as part of its innovation initiative, it was “considering how best to implement a regulatory framework that is receptive to responsible innovation, such as advances in financial technology,” and “whether a special purpose charter could be an appropriate entity for the delivery of banking services in new ways.”[3] And in December 2016, the OCC requested public comments on “whether it would be appropriate for the OCC to consider granting a special purpose national bank charter to a fintech company.”[4]

The OCC’s announcement and request for public comment kicked off a vigorous debate. State regulators, including the New York State Department of Financial Services, submitted comments to the OCC opposing its proposal. But many fintech firms welcomed the proposal and submitted comments to the OCC supporting it.

Then, in response to signals that the OCC was moving forward with its proposal, the New York State Department of Financial Services filed a lawsuit challenging the OCC’s authority to do so.

The Department alleged that the OCC’s proposal exceeds its statutory authority and violates the Tenth Amendment of the U.S. Constitution. Those causes of action were grounded in perceived harms. Specifically, the Department alleged that the OCC’s proposal would be “destructive” and would cause “concrete harm to New York’s financial market stability and consumer protection controls.”[5]

Without addressing the merits of those allegations, however, U.S. District Court Judge Naomi Reice Buchwald found that the Department lacks standing and that its claims are not ripe because, according to the Court, the OCC “has not reached a final ‘Fintech Charter Decision.’”[6]

According to Judge Buchwald, the Department’s “alleged injuries will only become sufficiently imminent to confer standing once the OCC makes a final determination that it will issue [special purpose national bank] charters to fintech companies.”[7]

Because Judge Buchwald dismissed the Department’s complaint without prejudice, we expect the Department to promptly refile its complaint if the OCC finalizes its proposal to issue national bank charters to fintech firms.


[1] See Remarks of Thomas J. Curry, Comptroller of the Currency, Before the Federal Home Loan Bank of Chicago. August 7, 2015 (https://www.occ.gov/news-issuances/speeches/2015/pub-speech-2015-111.pdf) (hereinafter, “Remarks”).

[2] Id.

[3] See Proposed Rulemaking, Receiverships for Uninsured National Banks, 81 Fed. Reg. 62,835 (Sept. 13, 2016).

[4] Office of the Comptroller of the Currency, “Exploring Special Purpose National Bank Charters for Fintech Companies,” December 2016 (https://www.occ.gov/topics/responsible-innovation/comments/special-purpose-national-bank-charters-for-fintech.pdf).

[5] Complaint, Vullo v. Office of the Comptroller of the Currency, No. 1:17-cv-03574 (S.D.N.Y. filed May 12, 2017), ECF No. 1.

[6] Order, Vullo v. Office of the Comptroller of the Currency, No. 1:17-cv-03574 (S.D.N.Y. entered Dec. 12, 2017), ECF No. 30.

[7] Id.