May 12, 2017 / 7:57 PM / a year ago

NY regulator sues U.S. OCC over national charters for online lenders

NEW YORK (Reuters) - New York’s banking regulator on Friday sued the U.S. Office of the Comptroller of the Currency over its plan to offer special-purpose charters that would let online lenders and other “fintech” companies do business nationwide, calling the plan “reckless folly.”

In the lawsuit, filed in U.S. District Court in Manhattan, Maria Vullo, superintendent of the New York Department of Financial Services, called the plan to grant the national charters “lawless, ill-conceived and destabilizing of financial markets” that are best regulated by the state.

The lawsuit, against the OCC and acting comptroller Keith Noreika, seeks to prevent the agency from offering the charters.

“The OCC’s reckless folly should be stopped,” the complaint says.

The charters would nullify New York’s interest rate caps and anti-usury laws, allowing internet lenders to gouge New York borrowers by locating in states that authorize higher rates, the lawsuit says.

The complaint also claims the charter exceeds the agency’s authority under the National Banking Act.

OCC spokesman Bryan Hubbard declined to comment on the lawsuit.

The agency is now reviewing comments on its draft licensing manual describing how it would evaluate applications from fintech companies involved in banking, Hubbard said. The comment period ended April 14.

It is unclear when or whether the charters will be allowed.

Late last month, a nationwide organization of state bank supervisors brought a similar lawsuit to prevent the agency from moving forward with the charters. That complaint was filed by the Conference of State Bank Supervisors in federal court in Washington.

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