New York state has filed a lawsuit against the US Office of the Comptroller of the Currency (OCC) over a decision to allow fintech companies to apply for national banking charters.
The lawsuit, which was filed in a federal court in Manhattan by the state's Department of Financial Services (NYDFS), alleges that allowing fintechs to apply for special national charters could enable online lenders, cryptocurrency exchanges and alternative payment firms to operate without the need for a banking partner.
The idea of special banking charters has long been opposed by both state regulators and the financial services industry. The NYDFS has had a running battle with the OCC over the issue. While federal bodies such as the OCC have sought to create a more streamlined regulatory landscape for financial startups that avoids the state-by-state structure of US financial regulation, the incumbent institutions and state regulators disagree.
In December a judge threw out an earlier lawsuit from the NYDFS on the grounds that the action was 'premature' because the OCC had neither issued any charters or received any applications.
However, once the OCC invited fintechs to apply for the charter in July, the lawsuit was resurrected.
The NYDFS superintendent Maria Vullo, maintains that the OCC's charter initiative is "lawless" and "ill-conceived" and could destabilise financial markets that are better regulated at a state level.
Vullo also alleges that New York financial consumers would be "at great risk of exploitation by federally chartered entities improperly insulated by New York law".