The D.C. federal district court has granted the OCC’s motion to dismiss the lawsuit filed by the Conference of State Bank Supervisors (CSBS) to block the OCC from issuing special purpose national bank (SPNB) charters to fintech companies.
The CSBS lawsuit was the second lawsuit filed by CSBS attempting to block the OCC from issuing SPNB charters. The first lawsuit, which was filed in April 2017, was dismissed in May 2018 for failing to establish an injury in fact necessary for Article III standing and for lacking ripeness for judicial review. The second lawsuit was filed in response to the OCC’s July 2018 announcement that it would begin accepting applications for SPNB charters from fintech companies.
In its opinion granting the OCC’s motion to dismiss, the court found that in the absence of an allegation that a charter application has been filed or that the OCC has issued an SPNB charter, CSBS had still failed to plead an injury in fact that was either actual or imminent. It also found that the second complaint remained inadequate because it had not identified particular CSBS members that face imminent injury, stating that until a charter application is filed, “CSBS can only guess which states and which members face imminent injury.” In addition, the court found that the dispute was still not constitutionally or prudentially ripe for determination.
CSBS’s opposition to the OCC’s motion to dismiss was accompanied by an “Alternative Motion for Leave to Conduct Discovery” in which, among other things, CSBS asked for discovery to determine the nature and number of companies the OCC has met with concerning the SBNB charter and the status of any draft applications, including which companies are preparing or have submitted draft applications and the content of such applications. In opposing CSBS’s alternative motion, the OCC indicated that it “voluntarily will undertake to immediately inform the Court and CSBS when an SBNB Charter applicant makes public notice required by [OCC regulations.”]
The district court denied the alternative motion, finding that it was unwarranted because the court will lack jurisdiction over CSBS’s claims at least until a charter application is filed and OCC regulations will require public notice of such filing. In addition, the court pointed to the OCC’s agreement to notify the court and CSBS of a filing.
In May 2019, a NY federal district court denied the OCC’s motion to dismiss a similar second lawsuit filed by the New York Department of Financial Services (NYDFS). (The NYDFS’s first lawsuit was dismissed for lack of standing.) The court concluded not only that the NYDFS had established standing to sue and that its claims were ripe for decision, but also that the NYDFS had stated a claim under the Administrative Procedure Act. In doing so, the court found that the term “business of banking” as used in the National Bank Act “unambiguously requires receiving deposits as an aspect of the business.”
Despite the dismissal of the CSBS lawsuit, the decision in the NYDFS lawsuit denying the OCC’s motion to dismiss casts doubt on the SPNB charter. Since the denial of its motion, the OCC has sought several extensions of the deadline for answering the complaint to confer with the NYDFS regarding the language of a proposed final judgment. The current filing deadline is September 30, 2019.