In a press release, the organizers of Varo Bank, N.A. announced they have been granted preliminary approval by the OCC of their application to form a de novo national bank, which they claim “put[s] Varo on track to become the first all-mobile national bank in the history of the United States.”
In July 2018, the OCC announced that it would begin accepting applications for special purpose national bank (SPNB) charters from financial technology (fintech) companies. Rather than a SPNB charter, Varo is seeking a full-service national bank charter from the OCC. A SPNB charter provides an option for a fintech company for whom, because of its own non-financial activities or those of an affiliate, the Bank Holding Company Act would be an obstacle to obtaining a full-service national bank charter. Obtaining a full-service national bank charter, however, is the preferred option for a fintech company that can do so consistent with the BHCA. Many years ago, two of my Ballard partners successfully converted a consumer finance company to a full-service national bank.
Federal court lawsuits challenging the OCC’s authority to issue SPNB charters were filed in 2017 by the Conference of State Bank Supervisors and the New York Department of Financial Services. Both lawsuits were dismissed for failure to establish an injury in fact necessary for Article III standing and lack of ripeness for judicial review. While such challenges may be renewed now that the OCC has announced that it will begin accepting SPNB charter applications, there would not appear to be any basis for a similar challenge to the issuance of a full-service national bank charter to Varo assuming it satisfies the standard conditions for obtaining such a charter.