U.S. state banking regulators drop lawsuit over fintech charters

U.S. one dollar banknotes are seen in this illustration
REUTERS/Dado Ruvic/Illustration
  • Lawsuit sought to block fintechs from gaining bank status
  • Company first in line recently said it would take deposits

(Reuters) - A group of U.S. state banking regulators dropped its lawsuit seeking to block the federal government from granting bank charters to fintech companies on Thursday, after the company that was first in line modified its business plan.

The Conference of State Bank Supervisors (CSBS) sued the U.S. Comptroller of the Currency (OCC) in 2020, arguing that giving national bank status to fintechs would flout states' authority to oversee non-bank lenders.

The lawsuit filed in Washington, D.C., sought to block approval of a charter application by Figure Technologies Inc, saying the OCC lacked authority to classify companies that do not receive deposits as banks.

Figure updated its application in December, saying it plans to offer federally insured deposit accounts.

The CSBS lawsuit was part of a years-long fight between state and federal regulators over who should regulate app-based financial services and online lenders.

Acting Comptroller of the Currency Michael Hsu said in a speech in November that his office is deepening its relationships with state regulators, and that fintechs should be held to banking standards.

The case is Conference of State Bank Supervisors v. Office of the Comptroller of the Currency et al., U.S. District Court, District Of Columbia, No. 20-cv-03797.

For CSBS: Jennifer Ancona Semko and Graham Cronogue of Baker Mckenzie

For the OCC: Marsha Stelson Edney and Benjamin McDonough

Read More:

2nd Circuit reverses win for NY in fintech regulatory dispute

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com