New York’s top financial regulator is challenging the federal government’s decision to allow financial technology companies to apply for national bank charters, calling it “lawless, ill-conceived, and destabilizing of financial markets.”

The Trump administration has been seeking to ease restrictions on fintech firms such as online lenders LendingClub and OnDeck Capital in order “to foster the nation’s vibrant financial services and technology sectors.”

As part of that effort, the Office of the Comptroller of the Currency announced in July that it would begin accepting applications for national bank charters from nondepository financial technology companies.

But in a lawsuit filed on Friday, New York’s Department of Financial Services said the OCC decision would leave consumers “at great risk of exploitation” by weakening oversight of predatory lending, allowing the creation of more “too big to fail” institutions, and undermining the ability of local banks to compete.

“The OCC’s reckless folly should be stopped,” the NYDFS said.

The suit seeks a court order declaring the OCC exceeded its authority under the National Bank Act and violated the Constitution’s 10th Amendment by usurping state powers.

As Reuters reports, “Fintech firms have long pushed for national bank charters to let them operate nationwide without needing licenses in every state, a process they say can impede growth and boost costs.”

Critics, however, “believe granting national bank charters to fintech firms, including those that do not hold deposits, could shield unscrupulous companies from state oversight,” Reuters added.

NYDFS oversees more than 2,200 banks, financial services companies and insurers with about $7 trillion of total assets. “Financial centers like New York, which have developed comprehensive and well-functioning regulatory bodies, should not needlessly bear the harmful brunt of an overreaching federal agency,” it said in its complaint.

OCC regulations allow the agency to charter “special purpose” national banks that engage in at least one of three “core banking functions” — accepting deposits, paying checks, or lending money.

A spokesman said the OCC would vigorously defend its authority to grant national charters to qualified companies “engaged in the business of banking.”

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