A group of U.S. banking regulators withdrew their lawsuit that sought to block the federal government from granting bank charters to FinTech companies.
The Conference of State Bank Supervisors (CSBS), the national trade group of bank regulators, announced Thursday (Jan. 13) that it has dropped the complaint in federal court challenging the Office of the Comptroller of the Currency’s (OCC) nonbank charter program and Figure Technologies’ application for an OCC nonbank charter.
CSBS said it withdrew their suit after Figure, the San Francisco-based FinTech, amended its bank application to include seeking FDIC deposit insurance, complying with the legal requirement that national banks obtain federal deposit insurance before operating as a bank.
“The federal banking laws are clear,” said Margaret Liu, CSBS executive vice president, in a statement. “Financial service companies, like Figure, that send and receive customers’ money or lend money, must obtain FDIC insurance to operate under a federal bank charter.”
State regulators are prepared, she added, to revisit the issue should the OCC consider a bank charter application from a company that will not be FDIC-insured.
Filed in 2020, the lawsuit alleged that by creating a national bank charter for nonbank companies, the OCC exceeded its authority under the National Bank Act. Those laws, CSBS argued, authorize the OCC to only charter institutions that lawfully engage in the business of banking, which under federal law requires an institution, at minimum, to receive deposits and become FDIC-insured.
The CSBS lawsuit was part of an ongoing battle between state and federal regulators over who should regulate FinTech financial services and online lenders.
As far back as 2016, PYMNTS has chronicled the CSBS’ campaign against offering banking charters to FinTechs.
In 2017, PYMNTS reported the CSBS filed suit against the OCC in response to the latter’s plans to offer banking charters to FinTechs.
Read more: Lawsuit Filed Over OCC FinTech Charter Plans