NY Sues Fed Over OCC’s FinTech Charter Decision

To challenge the Office of the Comptroller of the Currency (OCC)’s decision to allow online payment companies and lenders to have national bank charters, the top banking regulator in New York is suing the federal government.

In a complaint filed with a federal court, New York Department of Financial Services (DFS) Superintendent Maria Vullo said, “The OCC’s reckless folly should be stopped,” Reuters reported.

Further panning the decision, Vullo called the move “lawless, ill-conceived and destabilizing of financial markets.” The decision, she said, also means that consumers are “at great risk of exploitation,” and paves the way for further “too big to fail” institutions. But Bryan Hubbard, a spokesperson for the OCC, said it would defend the ability to provide qualified firms “engaged in the business of banking” with national charters.

The news comes as the department was recommending in July that online lenders be subjected to the same scrutiny and regulations that traditional banks face.

A bill signed by Governor Andrew M. Cuomo on June 1, 2017 required DFS to study online lending in New York State and submit a report of its findings. Vullo announced the release of that report in mid-August.

Among its findings is that the majority of New Yorkers using online banking are individuals as opposed to businesses. The 35 companies that provided information in response to the Department’s survey reported that in 2017, the total number of New York customers, both individuals and businesses, was 235,320 — an increase of approximately 79 percent from their 2015 level. Of that total, 8,664 were New York business customers and 226,656 were New York individual customers.

At the time, Vullo said, “Our review shows that while online lending has grown in recent years, our banking industry still supports the overwhelming majority of lending in New York while being subject to strong safeguards and oversight.”