A storm is brewing between state regulators and the OCC over fintech licensing

A leading association of state banking regulators is trying to put the U.S. national banking regulator in its place on the issue of fintech registration.

Per a Dec. 22 filing, the Conference of State Bank Supervisors, or CSBS, says the impending approval of Figure Technology’s bank charter a bridge too far. Figure operates blockchain-backed lending and investment services. It announced its application to the Office of the Comptroller of the Currency for a charter at the beginning of November. At the time, CEO Mike Cagney noted the relative convenience of a national charter, saying:”we’ll have over 200 state licenses next year without such a charter.”

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The OCC, which is the Treasury office responsible for national banks, first floated the idea of special purpose bank charters for fintech firms back in 2016 under then-Comptroller Thomas Curry. State regulators including the CSBS and New York’s Department of Financial Services, or NYDFS, immediately dogpiled the proposal as operating in defiance of the definition of “bank,” as well as in overstepping the OCC’s own charter. The CSBS, for instance, resolutely refers to the OCC’s work as “the Nonbank Charter Program.”

From the perspective of the CSBS, the situation only got worse in July of 2018, when then-Comptroller Joseph Otting said the OCC was open for applications. CSBS filed another suit later that year.

The court ultimately dismissed the case on the grounds that: “CSBS continues to lack standing and its claims remain unripe.” In that decision, however, the court attributed that “unripeness” to the fact that no fintech had yet applied for a charter, much less received one.

A month later in the final judgment in the NYDFS case, a Manhattan judge found that the OCC’s statutory authority “is set aside with respect to all fintech applicants seeking a national bank charter that do not accept deposits,” dealing a blow to the OCC.