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1 1 (December 6, 2019)

handle is hein.crs/govbivx0001 and id is 1 raw text is: ~* or 101 ' Researh Servi kM- Court Battle for Fintech Bank Charters to Continue December 6, 2019 The Office of the Comptroller of the Currency (OCC) plans to appeal an October district court judgment holding that the agency lacks the authority to grant national bank charters to financial technology companies (fintechs) that do not take deposits. Fintechs provide the financial services sector with digital and software technologies, and businesses and consumers with web-based, technology-enhanced financial services. Chartering a fintech as a national bank would mean that the fintech would benefit from federal preemption of varying state licensing and consumer protection requirements. Moreover, a national bank charter carries with it the ability to open a Federal Reserve master account, which provides direct access to the payments system for financial transactions. Joseph Otting, Comptroller of the Currency, announced an intention to file an appeal to the U.S. Court of Appeals for the Second Circuit. This Sidebar will briefly summarize the background of this litigation and the specifics of the trial court decision, as well as potential considerations for Congress. Background The OCC bases its authority to issue bank charters to fintechs on the National Bank Act (NBA), which authorizes the agency to charter national banks to commence the business of banking and refers to national banks as associations to carry on the business of banking. The chronology of OCC's efforts to develop a fintech bank charter is as follows: * In 2003, OCC promulgated a regulation, 12 C.F.R. § 5.20(e), authorizing special purpose national banks (SPNBs). The regulation specifies that an applicant for a SPNB charter must conduct at least one of the following core banking functions: receiving deposits, paying checks, or lending money. At the time of the rulemaking in 2003, no reference was made to fintechs. * In December 2016, OCC solicited public comments on the prospect of using the 2003 regulation to offer a SPNB charter for fintech companies providing web-based financial services such as marketplace lending, digital payments, digital currency, and crowdfunding. OCC explained that it was proposing SPNB fintech charters as a means of offering regulatory consistency, preempting conflicting state licensing and consumer protection requirements, and ensuring fintechs and consumers are covered by the rigorous Congressional Research Service https://crsreports.congress.gov LSB10381 CRS Lega Sidebar Prepaed for Membeivs and Cornm ittees o4 Co q _gress ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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