Inside The Legal Battle For The Future Of Fintech

Michael Nonaka is quoted in Law360 regarding the OCC and New York Department of Financial Services’ legal battle over how the fintech industry will be regulated. Mr. Nonaka says, “The litigation challenging the OCC's authority to issue a special purpose fintech charter certainly has delayed the process for nondepository fintech firms to apply and receive approval from the OCC for special purpose national banks.”

Over the years, however, the courts have made it clear the OCC has significant breadth to define the "business of banking." The U.S. Supreme Court found in 1995 in NationsBank v. VALIC that the OCC could define, within reason, what it means to be in the "business of banking. The OCC's regulation ... providing for special purpose national bank charters would seem to fall squarely within the OCC's authority as described by the Supreme Court in the VALIC case,” he says.

He adds, “It is highly likely that nondepository fintech firms will eventually find a more stable place in the regulated financial services sector at the federal level. Whether that happens through a specialized national bank charter is, at present, an issue for the courts to decide.”