Fintech Charters

Today, the OCC released an interpretive letter concluding that national banks and federal savings associations (together, “banks”) may permissibly provide cryptocurrency custody services for customers.  The letter, written by Chief Counsel Jonathan Gould, describes custody of cryptocurrency as a modern form of the traditional banking activity of providing safekeeping and custody services, which the agency has previously permitted banks to conduct through electronic means.  The letter also “reaffirms the OCC’s position that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law.”
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Continue Reading OCC Interpretation Paves Way for Banks to Custody Cryptocurrency

On October 25, 2018, the Conference of State Bank Supervisors (“CSBS”) filed a complaint in the United States District Court for the District of Columbia to stop the Office of the Comptroller of the Currency (“OCC”) from issuing special purpose national bank charters to fintech companies.  The lawsuit follows a similar suit against the OCC by the New York State Department of Financial Services (“DFS”) in the United States District Court for the Southern District of New York, which we discussed in September.
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Continue Reading State Regulators Renew OCC Suit Over Fintech Charter

On September 14, 2018, Superintendent of the New York State Department of Financial Services (“NYSDFS”) Maria T. Vullo filed a complaint in federal court against the U.S. Office of the Comptroller of the Currency (“OCC”) to block the OCC from issuing any special purpose national bank (“SPNB”) charters. The OCC announced last month, after much…

On July 5, 2018, Square, Inc. (“Square”) announced (paywall) that it had temporarily withdrawn a pending application with the FDIC to obtain deposit insurance for a proposed industrial loan company (“ILC”), in order to strengthen the application before reapplying. The company stated that a parallel application with the Utah Department of Financial Institutions for the…

In remarks on Wednesday before the Exchequer Club in Washington, Acting Comptroller of the Currency Keith Noreika responded to State regulators and consumer advocates who have criticized the OCC’s proposed special purpose fintech charter (the proposed charter is discussed in this Covington client alert).

Acting Comptroller Noreika’s comments on the fintech charter reflect an…

On April 26, 2017, the Conference of State Bank Supervisors (“CSBS”) filed a complaint against the Office of the Comptroller of the Currency (“OCC”) and Comptroller of the Currency Thomas J. Curry to block the agency from going forward with its proposal to grant special purpose national bank charters to fintech companies. The CSBS filed this lawsuit in the U.S. District Court for the District of Columbia.

In December 2016, Comptroller of the Currency Thomas J. Curry announced that the OCC intended to issue special purpose national bank charters to fintech companies. We discussed this announcement and the accompanying white paper in detail in a client alert. The white paper argued the OCC had authority under the National Bank Act (“NBA”) to grant special purpose charters to companies that make “bank-permissible, technology-based innovations in financial services” and that engage in at least one of three enumerated activities: receiving deposits, paying checks, or lending money. After a round of public comment—which included a critical comment letter from CSBS—the OCC released a draft supplement to its Licensing Manual that explained how it intended to evaluate fintech companies applying for special purpose charters.

The CSBS’s complaint argues that the OCC does not have the authority to grant such charters to fintech companies under federal law and that the proposal would inhibit state regulators’ ability to protect consumers.  In a press release, CSBS President and CEO John Ryan stated, “The OCC’s action is an unprecedented, unlawful expansion of the chartering authority given to it by Congress for national banks.” Mr. Ryan further explained, “To protect consumers and taxpayers, to promote innovation, and to ensure fair and open competition, CSBS was forced to take legal action against the OCC charter.”…

Continue Reading Conference of State Bank Supervisors Sues To Stop OCC Fintech Charters

On Wednesday, the Office of the Comptroller of the Currency (“OCC”) issued a highly-anticipated draft supplement to its Licensing Manual (the “Supplement”) for evaluating applications from fintech companies for a special purpose national bank (“SPNB”) charter. The Supplement explains how the OCC will apply its existing licensing standards and requirements to these companies. The OCC is accepting comments on the Supplement until April 14, 2017.

This publication follows comments by Comptroller Thomas J. Curry at the LendIt conference indicating that supplemental licensing guidance for fintech companies would be released soon.  Shortly after these comments, Republicans on the House Financial Services Committee sent a letter to Comptroller Curry noting that his term expires in April and directing the OCC to subject any such guidance to public comment and to refrain from finalizing the guidance before the appointment of a new Comptroller.  The OCC does not typically offer the public an opportunity to comment on procedural manuals and supplements, a fact noted in the OCC press release, so the OCC may have been influenced by the House Republicans’ letter.

The Supplement reflects principles broadly consistent with a white paper released by the OCC in December 2016, which we discussed in detail in a previous client alert. The OCC received a number of comments on its white paper. These comments are cataloged and analyzed in a separate document, the Summary of Comments and Explanatory Statement, also released by the OCC yesterday.

Some highlights from the Supplement are discussed below.…

Continue Reading OCC Issues Draft Licensing Manual for Evaluating Charter Applications from Fintech Companies

In separate remarks at the Lendit USA 2017 conference on March 6, 2017, Thomas Curry, the Comptroller of the Currency, and Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB), discussed their respective agencies’ approaches to fintech. Although neither agency head made any groundbreaking announcement, their remarks provide an up-to-date summary of the…

With this week’s close of the comment period on the December 2016 whitepaper by the Office of the Comptroller of the Currency (“OCC”) regarding special purpose charters for fintech companies, which we discussed in a previous client alert, several key stakeholders have weighed in on the OCC’s plans.  Notably, on January 13, 2017, the Conference of State Bank Supervisors (“CSBS”), the nationwide organization representing banking regulators from all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, submitted a comment letter opposing the OCC’s creation of the charter.  On January 17, 2017, the Superintendent of the New York State Department of Financial Services (“NYSDFS”), Maria T. Vullo, submitted a standalone comment letter also opposing the charter.
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Continue Reading State Banking Regulators Oppose OCC Fintech Charter

In a speech delivered yesterday to an industry conference in London, Comptroller of the Currency Thomas Curry did not reject the idea of a special charter for fintech firms – but did reject the idea that such a charter would come with lessened regulatory burdens as compared to a traditional bank charter.

In particular, Comptroller Curry emphasized that, should his office decide to grant a charter to fintech firms that do not wish to become (or do not qualify to be) national banks or federal savings associations: “the institution will be held to the same high standards of safety, soundness, and fairness that other federally chartered institutions must meet.”

Moreover, commenting on the U.K. Financial Conduct Authority’s “regulatory sandbox” (pitched as “a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences”), Comptroller Curry noted:

I do not support this approach.  Waiving compliance with consumer protection or safety and soundness never makes sense, nor does our agency have the authority to waive compliance requirements. It is the company’s responsibility to ensure products and processes are safe before rolling them out.  But, companies can conduct carefully designed pilots responsibly and limit their liability by controlling scope and duration and ensuring their tests are closely monitored throughout.

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Continue Reading Comptroller Curry Emphasizes That Fintech Charter Will Not Involve Regulatory Relief, Rejects “Sandbox” Approach to Financial Innovation