The OCC announced this week that it has conditionally approved applications from Social Finance Inc. (SoFi) to create SoFi Bank, National Association (SoFi Bank, N.A.), as a full service national bank headquartered in Cottonwood Heights, Utah.
The OCC’s press release indicates that as part of the transaction, SoFi Bank, N.A. is acquiring Golden Pacific Bank, National Association, an insured national bank, and will continue to offer a range of local commercial-focused loan and deposit products previously offered by Golden Pacific. The bank will also provide a fully digital, mobile-first national lending platform for consumers across the country. Among other conditions imposed by the OCC in connection with the approval is that the resulting bank will not engage in any crypto-asset activities or services. In addition, the parent company of SoFi Bank, N.A., SoFi Technologies, has applied to the Federal Reserve to become a bank holding company and therefore subject to consolidated supervision.
In its press release, the OCC stated that its approval “brings SoFi, a large fintech, inside the federal bank regulatory perimeter, where it will be subject to comprehensive supervision and the full panoply of bank regulations, including the Community Reinvestment Act. This levels the playing field and will ensure that SoFi’s deposit and lending activities are conducted safely and soundly, including limiting the bank’s ability to engage in crypto-asset activities.” The press release also quoted Acting Comptroller Hsu’s statement that “This action is consistent with the comprehensive legal and policy review of pending licensing decisions I initiated last May, and our work with other federal and state regulators to develop a coordinated approach to modernizing the federal regulatory perimeter.”
The references to a “level playing field” and “modernizing the federal regulatory perimeter” are similar to those included in Acting Comptroller Hsu’s statement regarding the withdrawal of the lawsuit filed by the Conference of State Bank Supervisors (CSBS) seeking to block the OCC from granting a national bank charter to Figure Technologies Inc. The lawsuit, like previous CSBS lawsuits, challenged the OCC’s authority to issue special purpose national bank (SPNB) charters to non-depository fintech companies or to uninsured deposit-taking fintechs. In its press release announcing the withdrawal, the OCC stated that Figure Technologies had amended its charter application for Figure Bank, National Association, to offer FDIC-insured deposit accounts.
These developments suggest that, at least for now, seeking a full service national bank charter (either through an acquisition of an existing financial institution or a de novo charter) is the most practical route available to fintech companies that wish to obtain a charter from the OCC and that seeking a SPNB charter that would allow a fintech company not to take deposits or to take deposits without being FDIC-insured is a path fraught with uncertainty. However, we note that seeking a charter will pose its own challenges (including a thorough review of the proposed business plan) and may not be a viable option for many fintechs if they engage in commercial activities beyond those permitted for bank holding companies.