Banking and Finance Law Daily OCC and CSBS file replies in suit to block fintech charter
Thursday, February 28, 2019

OCC and CSBS file replies in suit to block fintech charter

By J. Preston Carter, J.D., LL.M.

In reply briefs, the Conference of State Bank Supervisors supports its request for discovery and the Office of the Comptroller of the Currency supports its motion for dismissal of the CSBS suit to block the OCC’s planned fintech charter.

In their latest motions in the Conference of State Bank Supervisors’ suit to block the Office of the Comptroller of the Currency’s planned fintech charter, the CSBS filed a reply brief in support of its request to conduct jurisdictional discovery, and the OCC filed a reply brief in support of its motion to dismiss the case (Conference of State Bank Supervisors v. OCC).

The CSBS sued the OCC in an effort to block the agency from creating a new special-purpose fintech charter, under its Special Purpose National Bank charter authority. The CSBS is seeking court action based on the OCC’s announcement in July 2018 that it is accepting applications for the new bank charter for fintechs as well as the OCC’s publication of a Licensing Manual Supplement. CSBS previously filed suit against the OCC in 2017. After that suit was filed, the OCC announced that it had not yet determined whether it would move forward with the new charter, and the court decided that the issue was not ready for consideration. The latest complaint from the CSBS argues that "[t]hings have changed substantially since the Court’s decision," and that "issuance of a Nonbank Charter is now clearly imminent" (Banking and Finance Law Daily, Oct. 25, 2018).

The CSBS then requested leave to conduct jurisdictional discovery, and the OCC moved to dismiss the case, arguing that the court previously decided that CSBS will not have standing to challenge the SPNB chartering authority until the OCC actually charters a fintech, which to date, it has not (see Banking and Finance Law Daily, Feb. 21, 2019).

CSBS reply. In its reply brief, the CSBS argues that, because it has sufficiently alleged a ripe claim for procedural injury, existing harm, and sufficiently impending future harm, the OCC's motion to dismiss for lack of subject matter jurisdiction should be dismissed. It also contends that it would be error for the court to deny subject matter jurisdiction based on the pleadings alone, without permitting discovery. According to the CSBS, the OCC itself has put at issue the status of its Nonbank Charter Program, yet the agency seeks to deny CSBS the right to obtain discovery of additional evidence that would resolve the discrepancy between "the OCC's public statements touting the imminence of a charter, and its unsupported assertions in its pleadings that a charter is uncertain."

The CSBS also says the OCC contends that only the final grant of a nonbank charter is relevant to establish subject matter jurisdiction; However, the CSBS’s motion states, this disregards both settled law (which allows CSBS to establish jurisdiction based on future injury) and the true nature of the Court's prior ruling (which held that the granting of a charter would irrefutably establish actual harm, but acknowledged that future harm could be a basis for jurisdiction as well).

OCC reply. In its reply brief, the OCC argues that the lawsuit should be dismissed for lack of standing. According to the OCC, the CSBS fails to demonstrate that the Court has jurisdiction over this matter because the agency has not approved any application for a Special Purpose National Bank Charter, which the Court held is the prerequisite for CSBS suffering an injury and thus having standing to sue.

However, the OCC’s motion continues, even if the Court had jurisdiction, the CSBS’s complaint is still subject to dismissal because the OCC’s longstanding special purpose bank chartering regulation (12 CFR 5.20(e)(1)) is a reasonable construction of the National Bank Act that is entitled to Chevron deference—that the term "business of banking" is ambiguous and that the Comptroller’s reasonable interpretation of the term would receive "controlling weight."

Attorneys: Jennifer Ancona Semko (Baker & McKenzie, LLP) for Conference of State Bank Supervisors. Gregory F. Taylor for the OCC.

Companies: Conference of State Bank Supervisors

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