The OCC has filed its reply brief with the Second Circuit in its appeal from the district court’s final judgment in the lawsuit filed by the New York Department of Financial Services (DFS) challenging the OCC’s issuance of special purpose national bank (SPNB) charters to non-depository fintech companies.

In May 2019, the district court denied the OCC’s motion to dismiss and found that the term “business of banking” as used in the National Bank Act  (NBA) “unambiguously requires receiving deposits as an aspect of the business.”  Because the district court also ruled that its decision should have nationwide effect regardless of whether the charter applicant has a New York nexus, the OCC has been unable to approve any applications for SPNB charters from non-depository fintech companies regardless of whether the applicant has a New York nexus.  With the OCC’s and DFS’s consent, the district court entered a final judgment against the OCC in October 2019, thereby enabling the OCC to file an appeal.  The OCC filed its opening brief in April 2020 and the DFS filed its opening brief last month.

In its reply brief, the OCC renews the following principal arguments made in its opening brief:

• DFS’s claims are not justiciable for the following reasons: (1) DFS lacks standing because its alleged injuries are speculative as they rely on a series of events that have not yet occurred: the OCC receiving and approving an SPNB charter application for a non-depository fintech company that intends to conduct business in New York, and then does so in a manner that causes the harms identified by the DFS, and (2) even if the DFS has standing, its claims are not prudentially ripe because the dispute would benefit from further factual development and the DFS would not experience any detriment if the dispute is not adjudicated now.
• OCC’s interpretation of “business of banking” is reasonable and entitled to Chevron deference.  The NBA’s text and structure do not render deposit-taking an unambiguous requirement of the “business of banking,” historical practice and the NBA’s legislative history do not resolve the NBA’s ambiguities, other federal banking laws do not establish that institutions must accept deposits to engage in the “business of banking,” and courts have recognized that “business of banking” is a flexible concept.
• DFS was not entitled to nationwide relief.  Even if the court concludes that DFS’s claims are justiciable and disagrees with the OCC’s interpretation of the NBA, it should reject nationwide relief and only set aside 12 C.F.R. § 5.20(e)(1) with respect to non-depository fintech applicants that have a New York nexus.

As we have previously commented, we continue to be puzzled by the OCC’s focus on the standing argument.  Unless reversed, the district court’s decision will continue to be a cloud that deters the filing of SPNB charter applications.  It will also negatively impact the OCC’s recently-previewed plans to introduce another special purpose national bank charter that would give payment companies a nationwide servicing platform and federal preemption of state laws regarding licensing and regulation of money transmitters and payment services providers.  Accordingly, it would seem to be in the interest of all concerned for the Second Circuit to issue a decision that resolves the issue on the merits.