In May 2019, a New York federal district court denied the OCC’s motion to dismiss a lawsuit filed by the New York Department of Financial Services (NYDFS) seeking to block the OCC’s issuance of special purpose national bank (SPNB) charters to fintech companies.  In doing so, the court found that the term “business of banking” as used in the National Bank Act (NBA) “unambiguously requires receiving deposits as an aspect of the business.”  At the time, we criticized the decision as incorrect and outcome-oriented.  We also commented that in light of the importance of the issue and because the decision casts doubt on SPNB chartering, we would welcome a Second Circuit decision at the earliest opportunity.  With the consent of both the OCC and the NYDFS, the court has now entered a final judgment against the OCC.  This positions the OCC to appeal the May decision.

In entering final judgment, the district court resolved one issue that remained in dispute between the OCC and NYDFS—whether the court’s decision should have nationwide effect or apply “merely” to  SPNB applicants “that have a nexus to New York State, i.e., applicants that are chartered in New York or that intend to do business in New York (including through the Internet) in a manner that would subject them to regulation by DFS.”  On this issue, too, the court sided with the NYDFS.  Accordingly, the final judgment prevents the OCC from approving applications for SPNB charters to non-depository fintech companies regardless of whether the applicant has a New York nexus.

As previously reported, last month the D.C. federal district court hearing a similar lawsuit filed by the Conference of State Bank Supervisors (CSBS) against the OCC granted the OCC’s motion to dismiss on ripeness grounds.  No appeal has been filed by CSBS.

We hope that the Second Circuit will address the chartering issue on the merits—in favor of the OCC—and will not duck the issue by finding the matter premature for adjudication.