A state regulator won the latest round this week in the battle over U.S. regulation of nonbank financial service providers. And in a separate attempt to modernize how financial services are regulated, a lawmaker introduced legislation in hopes of better supporting innovation in the space.

The federal judge in a lawsuit brought by the New York Department of Financial Services (DFS) ruled on Monday that the U.S. Office of the Comptroller of the Currency (OCC) did not have the legal power to grant national banking charters to entities that aren’t eligible to take deposits, according to the Wall Street Journal

The judge ruled that the National Banking Act – the law that created the national banking system – “unambiguously” states that “only depository institutions are eligible to receive national bank charters from OCC.”

The OCC first said it would begin accepting applications from financial technology firms for a special purpose national bank charter in 2016. Supporters of the charter have praised the effort to update financial services regulation. They cite a need to bring consistency to the sector, which has a growing presence in consumers’ lives and is in some cases subject to a burdensome patchwork of state laws.

But notable critics of the charter have included the Conference of State Bank Supervisors and New York’s DFS, both of which have claimed the federal agency did not have the authority to create the charter.

The OCC plans to appeal this latest ruling, the WSJ article said. 

Another front in the effort to update the U.S. regulatory framework to better support financial services innovation opened Monday as North Carolina Rep. Patrick McHenry introduced the Financial Services Innovation Act of 2019. 

“My legislation modernizes our regulatory framework to ensure that financial institutions and entrepreneurs can go to market with innovative products sooner, all while maintaining important consumer protections,” McHenry said in a press release. 

“Whether you are a small community bank with a new idea or an entrepreneur just trying to navigate complex financial regulations, this bill would ensure regulators reduce the barrier to innovation, keep pace with our rapidly changing banking system, and confront areas of regulatory uncertainty that hamper innovation,” he said.

Intended to streamline how fintech companies interact with regulators, the bill requires federal regulatory agencies to create Financial Services Innovation Offices. Companies would be able to apply to those offices for alternative regulatory compliance plans.

Industry organization Financial Innovation Now praised the move.

“Enhancing federal regulatory coordination is helpful as technology and innovation continue to re-shape the evolving financial services landscape. Technology companies are bringing competitive financial products to market, and greater coordination among federal agencies is positive,” Brian Peters, executive director of Financial Innovation Now, said in a statement about the proposed legislation.

FIN is an industry alliance whose members include Amazon, Stripe, Google and Square.