At least for now. As you know, this ongoing issue revolving around the proposal to license fintech companies as special purpose national banks has been under review for some time.
As previously reported on here, last December saw the first public announcement from the Office of the Comptroller of the Currency (OCC) regarding the intent to begin accepting special purpose bank charter applications from fintech organizations. And since then, the response has been a mixed one.
Most recently, a New York Department of Financial Services (DFS) lawsuit has been dismissed based largely on a “perceived lack of threat to the DFS’ own regulatory powers,” according to Business Insider.
The same article reports the New York judge who dismissed the case did so based on the argument that the project “is still only hypothetical” and feels the outcome of the proposal “has become increasingly uncertain under President Trump’s two Comptrollers of the Currency.”
While Keith Noreika was very up front about his support for the initiative, Joseph Otting (his successor) has made no statement either way and this, according to the article, implies the judge holds little expectation the project will get off the ground.
Notable organizations like The Electronic Transaction Association (ETA) and Financial Innovation Now (FIN) have responded favorably in the past regarding the discussion about a regulatory framework that can successfully support the fintech business model.
As previously reported, the ETA specifically addressed the uniqueness of the fintech model – explaining how “the term fintech covers a broad spectrum of companies, including payment processors, money transmitters and online consumer and business lenders.” And it was their feeling that “the OCC should develop an approach for the fintech charter process that recognizes the unique characteristics of the different types of entities that fit under the fintech umbrella.”
In response to speculation on the federal government’s right to regulate fintech companies, the Conference of State Bank Supervisors (CSBS) previously filed a complaint in April of this year, citing the agency’s attempt to create a national charter as “unlawful.” And this was followed closely by the New York DFS filing a similar lawsuit in May (both previously reported on here), the latter of which is the one most recently dismissed.
Industrial Lending Company (ILC) charters are another option available for nonfinancial companies whereby the holders are eligible for FDIC insurance. However, while payments leader Square was one of the first companies to apply for this charter license in September (reported on here), the complexity of the process may be more of a deterrent for other fintechs to follow suit, according to the same article.