State bank supervisors are suing to block a federal regulator from granting a national bank charter to Figure Technologies, a blockchain-based financial services provider.
The Office of the Comptroller of the Currency would be preempting state authority to regulate non-banks if the application is approved, the Conference of State Bank Supervisors argued in a complaint filed Tuesday in the U.S. District Court for the District of Columbia.
A financial company that doesn’t obtain deposit insurance from the Federal Deposit Insurance Corporation—as Figure plans to do—isn’t a bank, the CSBS said.
Approving Figure’s application would result in the OCC going “far beyond the limited chartering authority granted to it by Congress under the National Bank Act (the ‘NBA’) and other federal banking laws,” the CSBS said in a lawsuit that seeks an injunction blocking the application.
The CSBS considers Figure’s application to become a national bank to be the first true application for a so-called OCC fintech charter.
“What the OCC and the company have tried to do is they’ve tried to create this artificial distance between the fintech charter and what Figure is applying for but they have no legal basis for doing that,” Margaret Liu, CSBS senior vice president and deputy general counsel told Bloomberg Law.
Figure previously said it doesn’t consider its application to be for a fintech charter. The company has said its application is for a national bank charter that would take large-dollar deposits from accredited investors, rather than dealing with retail consumers. The plan exempts Figure from obtaining deposit insurance, the company said.
State regulators have been seeking to block the OCC from offering a special purpose national bank charter to fintech companies since 2017. CSBS has challenged the OCC’s offering of a fintech charter twice before. The first challenge was dismissed because the OCC hadn’t yet finalized its decision to let nonbanks apply for a fintech charter. The second was dismissed in September 2019 after the same court found CSBS’s suit was unripe because no company had yet applied for the charter.
Figure’s application now makes the states’ challenge ripe for a court decision, CSBS said in the complaint.
“The OCC has solicited, vetted and accepted the Figure Charter Application—an application for a Nonbank Charter from a company that is licensed and regulated in all but one state and intends, under its charter, to operate in all states free of state regulatory oversight and consumer protection laws,” it said.
The OCC is also currently appealing a district court ruling preventing the regulator from offering bank charters to companies that don’t plan to take deposits. The appeal stems from a challenge brought by New York’s Department of Financial Services.
The case is Conf. of State Bank Supervisors, Inc. v. Office of the Comptroller of the Currency, D.D.C., docket number unavailable, complaint filed 12/22/20.