Bank-fintech partnerships win key battle, but war is far from over

Karen Solomon was quoted in American Banker about national bank regulators and two recent court decisions indicating that fintechs can more comfortably avoid state interest rate caps by partnering with banks.

According to Karen, “The rulings are an important — and very positive — outcome for those partnerships and for banks generally.” Karen continues, stating, “That said, I think it's likely that the state attorneys general will appeal the cases to the 9th Circuit. And, if the 9th Circuit's decision is different from the 2nd Circuit's in the Madden case, the case could ultimately end up before the Supreme Court.

“So, we could be a long way from final resolution of the underlying issue,” Karen said. Karen also believed it was unlikely that the national bank regulator would flip its core position on the matter, even under more progressive Democratic leadership. As Karen concludes, “If there is an appeal, I would not expect a material change in the OCC's approach to the litigation. The litigation is about the scope of a national bank's authority to charge interest under section 85 — a provision original to the National Bank Act in 1864. The OCC has taken a pretty consistent view of that authority over time.”

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