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New York sues U.S. regulator for allowing fintech bank charters
NEW YORK (Reuters) - New York state’s top banking regulator on Friday sued the U.S. Office of the Comptroller of the Currency, seeking to void its decision to begin granting national bank charters to online lenders and payment companies.
FILE PHOTO: A woman looks at her phone as she passes by a Lending Club banner on the facade of the the New York Stock Exchange December 11, 2014. REUTERS/Brendan McDermid/File Photo
Maria Vullo, superintendent of the New York State Department of Financial Services, called the OCC’s July 31 decision to let financial technology companies, or fintech firms, apply for and obtain the charters “lawless, ill-conceived, and destabilizing of financial markets” best regulated by New York.
She also said it puts the most vulnerable consumers “at great risk of exploitation” by weakening oversight of predatory lending, creating more “too big to fail” institutions, and undermining the ability of local banks to compete.
The complaint filed in Manhattan federal court seeks a declaration that the OCC exceeded its authority under the National Bank Act and violated the U.S. Constitution’s 10th Amendment by usurping powers belonging to states.
OCC spokesman Bryan Hubbard said in an email that the regulator, part of the U.S. Department of Treasury, will vigorously defend its authority to grant national charters to qualified companies “engaged in the business of banking.”
FILE PHOTO: The Daniel Patrick Moynihan U.S. Federal Courthouse is pictured in the Manhattan borough of New York, NY, US, August 26, 2014. REUTERS/Carlo Allegri/File Photo
Fintech firms had long pushed for national bank charters, believing they could help them bypass a plethora of state regulatory regimes that impede growth and boost costs.
The Treasury Department and some conservative Republicans have also said promoting fintech firms, such as the lenders LendingClub Corp and OnDeck Capital Inc and cryptocurrency exchange Coinbase, could spur job growth.
Joseph Otting, the comptroller of the currency, has said companies providing banking services in innovative ways “deserve the opportunity to pursue that business on a national scale.”
But critics believe granting such firms, including those that do not hold deposits, national bank charters could undermine consumer protections and inhibit state oversight.
Vullo’s office oversees more than 2,200 banks, financial services companies and insurers with about $7 trillion of total assets.
“Financial centers like New York, which have developed comprehensive and well-functioning regulatory bodies, should not should not needlessly bear the harmful brunt of an overreaching federal agency,” Vullo said in her complaint.
The case is Vullo v Office of the Comptroller of the Currency et al, U.S. District Court, Southern District of New York, No. 18-08377.
Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz and Marguerita Choy
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