Banking and Finance Law Daily OCC seeks dismissal of CSBS lawsuit challenging special purpose national bank charters
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Friday, April 30, 2021

OCC seeks dismissal of CSBS lawsuit challenging special purpose national bank charters

By Nicole D. Prysby, J.D.

The OCC argued that, just as two similar cases were dismissed previously, this challenge to special purpose national bank charters should be dismissed for lack of standing and ripeness.

The Office of the Comptroller filed a motion to dismiss claims brought against it by the Conference of State Bank Supervisors (CSBS), challenging the OCC’s authority to issue a special purpose national bank (SPNB) charter. CSBS sued the OCC over the agency’s creation of a new national bank charter for nonbank companies and its acceptance of a charter application from Figure Technologies Inc. The OCC argued that the CSBS claims must be dismissed because CSBS lacks standing and the claims are not ripe for review. CSBS, argued the OCC, lacks standing to challenge the SPNB regulation because there is no application pending for an SPNB. Despite CSBS’ claim, Figure is not seeking an SPNB charter but submitted an application for a full-service bank charter. The OCC also argued that CSBS lacks standing because the application is currently being considered and has not yet been approved and because it has not alleged an injury in fact. The OCC also argued for dismissal of the complaint for failure to state a claim, arguing that the boils down to unsupported allegations that the Figure application must be construed as an SPNB charter because, if approved, Figure would not be an insured bank and the OCC lacks authority to charter an uninsured national bank.

Background. As previously reported (see Banking and Finance Law Daily, Jan. 8, 2021), CSBS sued the OCC over the OCC’s creation of a new national bank charter for nonbank companies and its acceptance of a charter application from Figure Technologies Inc. This complaint was the third challenge by the CSBS alleging that the creation of a national bank charter for nonbank companies goes beyond the OCC’s authority. The previous two actions were dismissed for lack of lack of standing and ripeness.

OCC arguments for dismissal. The OCC argued that the case must be dismissed because CSBS lacks standing and the claims are not ripe for review. The OCC raised several issues specific to standing. First, that CSBS lacks standing to challenge the SPNB regulation because there is no application pending for an SPNB. Despite CSBS’ claim, Figure is not seeking an SPNB charter but submitted an application for a full-service bank charter. The OCC also argued that CSBS lacks standing to challenge the Figure application for a national bank charter because the application is currently being considered and has not yet been approved. And even if CSBS could pass those threshold standing issues, CSBS lacks standing because it has not alleged an injury in fact—its assertions that either it or any of its members will be injured are pure conjecture. Allegations that Figure could engage in activities that could violate various laws in various states do not rise to the level of specific facts demonstrating injury or imminent injury. As to ripeness, the OCC argued that the claims are prudentially unripe because the OCC has not received and is not considering an application for an SPNB charter. To the extent that CSBS is attempting to bootstrap a challenge to OCC’s Preemption Regulations to the Figure application, CSBS’ claim lacks standing and is unripe because an OCC decision to charter a national bank is not a preemption determination and the Figure Application has not yet been approved. Because "Figure National Bank" does not currently exist as an entity, the Preemption Regulations, which apply to the operation of all national banks, are not yet applicable.

The OCC also argued that the complaint should be dismissed for failure to state a claim. The lawsuit, the OCC argued, boils down to unsupported allegations that the Figure application for a national bank charter must be construed as an SPNB charter because, if approved, Figure would not be an insured bank and the OCC lacks authority to charter an uninsured national bank. CSBS’ allegations should fail for multiple reasons. The National Bank Act authorizes the OCC to charter uninsured national banks. There is no provision in the National Bank Act that requires all national banks to obtain deposit insurance. None of the other relevant banking statutes condition the OCC’s authority to charter a national bank on an institution obtaining deposit insurance. In addition, the SPNB charter regulation is inapplicable because the Figure application is not for an SPNB charter. The OCC’s preemption regulations are valid, and CSBS’ facial challenge to those regulations should be dismissed as time barred.

Companies: Conference of State Bank Supervisors; Figure Technologies Inc.

MainStory: TopStory BankingOperations DepositInsurance Preemption

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