United States District Court, District of Columbia
L. FRIEDRICH, United States District Judge
the Court is the Defendants' Motion to Dismiss. Dkt. 9.
For the reasons that follow, the Court will grant the motion.
action, the Conference of State Bank Supervisors (CSBS)
challenges the purported Nonbank Charter Decision of the
Office of the Comptroller of the Currency and the
Comptroller(collectively, the OCC). CSBS is a
nationwide organization of state banking and financial
services regulators from all fifty U.S. states, the District
of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, and
American Samoa. Compl. ¶ 13, Dkt. 1. The OCC is a bureau
of the U.S. Department of the Treasury and functions as the
primary supervisor of banks with national charters.
Id. ¶ 16; see also 12 U.S.C.
§§ 1, 26-27 (establishing the OCC and empowering it
to grant national bank charters to entities that carry on
“the business of banking”).
regulation in the United States is shared between federal and
state governments. Compl. ¶ 27. As a general matter, a
bank may choose to pursue a state or national charter, and
the bank will then be regulated primarily by the
corresponding authority. Id. ¶ 21. Through the
challenged Nonbank Charter Decision, the OCC allegedly
decided to move forward with a process for considering
national bank charter applications from companies that
provide bank-like services but do not accept deposits, which
have historically been regulated by the states. See
Id. ¶¶ 1, 3, 5, 26. Such firms have
experienced “explosive growth” in recent years.
Id. ¶ 4. Many of them are financial technology
companies, or Fintechs, that provide technology-driven
financial services. Id. ¶¶ 2-4. For
example, a Fintech might develop new ways to provide
traditional services like payment processing, or a Fintech
might develop cutting-edge services like crowd funding and
digital currencies. Id. ¶ 2. The OCC estimates
that there are now more than 4, 000 Fintechs in the United
States and the United Kingdom, fueled by worldwide investment
that has increased from $1.8 billion to $24 billion in the
last five years. Id. ¶ 4.
National Bank Act governs any decision to grant national bank
charters to Fintechs or other firms that do not accept
deposits. Under the Act, “the Comptroller shall examine
into the condition” of charter applicants and determine
whether each applicant's condition “entitle[s] it
to engage in the business of banking.” 12 U.S.C. §
26. If a charter applicant “is lawfully entitled to
commence the business of banking, ” the OCC shall issue
a national charter. Id. § 27. Also, the OCC is
authorized to prescribe rules and regulations to carry out
its chartering responsibilities. Id. § 93a.
National charters apply a uniform set of requirements to
national charter recipients and exempt recipients from uneven
state regulatory landscapes. Compl. ¶ 23. Historically,
the OCC has granted national charters only to banks that
receive deposits or other special purpose banks specifically
authorized by statute. See 12 U.S.C. § 27; 12
U.S.C. § 1841(c)(2)(D), (F) (authorizing trust banks,
banker's banks, and credit card banks); Compl.
¶¶ 38-46. Indeed, CSBS does not allege that a
single national charter has been granted to an entity that
does not receive deposits, and the OCC confirms the same.
See Defs.' Mem. at 14, Dkt. 9-2.
2003, the OCC promulgated a rule interpreting its chartering
authority to include the power to charter a special purpose
bank that limits its activities to “any . . .
activities within the business of banking, ” provided
that the special purpose bank conducts “at least one of
the following three core banking functions: Receiving
deposits; paying checks; or lending money.” 12 C.F.R.
§ 5.20(e)(1); see Rules, Policies, and
Procedures for Corporate Activities; Bank Activities and
Operations; Real Estate Lending and Appraisals, 68 Fed. Reg.
70122 (Dec. 17, 2003); Compl. ¶ 55. Under the rule, the
OCC could charter a special purpose bank that does not
receive deposits, so long as the bank pays checks or lends
money. That may open the door (assuming other requirements
are met) for a Fintech that does not accept deposits to
acquire a national charter.
particular aspect of the 2003 rule lay dormant for more than
a decade. But in March 2016, the OCC announced through a
white paper that it had begun to study the regulatory impacts
of innovations in financial technology. Compl. ¶ 47
(citing Office of the Comptroller of the Currency, Supporting
Responsible Innovation in the Federal Banking System: An OCC
Perspective (Mar. 2016),
In a December 2016 speech, then-Comptroller Curry said that
“the OCC will move forward with chartering
financial technology companies that offer bank products and
services and meet our high standards and chartering
requirements.” Thomas J. Curry, Special Purpose
National Bank Charters for Fintech Companies (Dec. 2, 2016),
Dkt. 1-2 at 4 (emphasis in remarks as published on the
OCC's website). According to Curry, “I have asked
staff to develop and implement a formal agency policy for
evaluating applications for fintech charters. The policy,
informed by the comments we receive on our [forthcoming]
white paper, will articulate specific criteria for approval
as well as issues that we should consider and conditions that
should be met before granting such charters.”
Id. at 6.
after, the OCC published a white paper that outlined general
“baseline” supervisory requirements for charter
holders. Office of the Comptroller of the Currency, Exploring
Special Purpose National Bank Charters for Fintech Companies
(Dec. 2016), Dkt. 1-3; see also Compl. ¶ 56-57.
This white paper solicited public feedback, and many parties
registered objections. Compl. ¶¶ 58-66. CSBS itself
raised a variety of concerns relating to the lawfulness and
wisdom of granting national charters to Fintechs. Letter from
CSBS to Comptroller Curry (Jan. 13, 2017), Dkt. 1-4; see
also Compl. ¶ 65. The OCC published a response to
these concerns on March 15, 2017. Office of the Comptroller
of the Currency, OCC Summary of Comments and Explanatory
Statement: Special Purpose National Bank Charters for
Financial Technology Companies (2017), Dkt. 1-6.
same day, the OCC published a draft supplement to the
Comptroller's Licensing Manual. See Office of
the Comptroller of the Currency, Evaluating Charter
Applications from Financial Technology Companies (Mar. 2017),
Dkt 1-5; see also Compl. ¶ 67. The draft
supplement pointed to 12 C.F.R. § 5.20(e)(1) to suggest
that Fintechs that do not take deposits eventually may be
allowed to apply for national charters if the OCC finalizes
the language in the draft. Compl. ¶¶ 67-68. In
addition, the draft supplement invited public feedback.
Id. ¶ 74. Many parties again registered
concerns and objections. Id. ¶¶ 74-75.
did not respond to these concerns and did not change the
draft status of the supplement between March 15 and April 26,
2017, see Id. ¶ 76, on which date CSBS filed
this challenge to the OCC's purported decision to move
forward with chartering national banks that do not accept
deposits, i.e., the Nonbank Charter Decision,
see Id. at 31, ¶ 12. CSBS asserts five claims:
(1) the OCC does not have statutory authority for the Nonbank
Charter Decision; (2) the OCC does not have statutory
authority for a corresponding regulation; (3) the Nonbank
Charter Decision failed to follow the appropriate rulemaking
procedures; (4) the Nonbank Charter Decision was arbitrary
and capricious; and (5) the Nonbank Charter Decision violated
the Tenth Amendment. See id ¶¶ 99-121.
CSBS filed its complaint, a number of developments have
occurred. The OCC has undergone two leadership changes along
with the changing presidential administrations, so Curry is
no longer Comptroller: he was succeeded in May 2017 by Acting
Comptroller Keith A. Noreika, who was then succeeded by the
current Senate-confirmed Comptroller Joseph M. Otting. The
OCC's new leadership suggested that, even if a Fintech
attempted to apply, the OCC may not accept the application.
In July 2017, for example, Acting Comptroller Noreika stated:
[A]t this point the OCC has not determined whether it will
actually accept or act upon applications from nondepository
fintech companies for special purpose national bank charters
that rely upon [12 C.F.R. 5.20(e)(1)]. And, to be clear, we
have not received, nor are we evaluating, any such
applications from nondepository fintech companies. The OCC
will continue to hold discussions with interested companies
while we evaluate our options. These meetings have been very
informative and provide insight into the financial landscape
and the companies providing traditional banking services as
they continue to evolve.
A. Noreika, Public Remarks before the Exchequer Club (July
19, 2017), Dkt. 9-3 at 10. Also in the time since the
complaint was filed, a similar lawsuit was filed against the
OCC in the Southern District of New York by Maria Vullo,
Superintendent of the New York State Department of Financial
Services. Vullo v. OCC, No. 17-cv-3574, 2017 WL
6512245 (S.D.N.Y. Dec. 12, 2017). The Southern District
recently dismissed that case, concluding that the plaintiff
lacked standing and that the dispute was not ripe.
Id. at *8-10.
now moves to dismiss this action under Rules 12(b)(1) and
12(b)(6) of the Federal Rules of Civil Procedure. Dkt. 9.
U.S. Constitution limits the federal courts to deciding cases
or controversies, U.S. Const. art. III, § 2, and it is
“presumed that a cause lies outside this limited
jurisdiction, ” Kokkonen v. Guardian Life Ins.
Co., 511 U.S. 375, 377 (1994); Attias v. Carefirst,
Inc., 865 F.3d 620, 625 (D.C. Cir. 2017). To present a
justiciable case or controversy, the party invoking federal
jurisdiction must demonstrate standing and ripeness, among
other requirements. Kokkonen, 511 ...