Civil War-era law dooms OCC’s fintech charter

Appeals court likely to uphold idea that taking deposits is a national bank activity that should keep the Office of the Comptroller from approving non-depository national bank charters.

The Office of the Comptroller of the Currency’s effort to create a federal fintech charter is in trouble because of a provision of the National Bank Act adopted by Congress in 1864, but not one that limits banks’ ability to use technology. The legal controversy over OCC’s fintech charter is focused instead on whether the Civil War-era Congress that passed the National Bank Act viewed “receiving deposits” as one of the fundamental aspects of the “business of banking.”

A federal district court ruled in 2019 that OCC’s  “special purpose national bank” rule, which the agency planned to use to create fintech-charter national banks that do not accept deposits, exceeded the agency’s statutory authority because “only depository institutions are eligible to receive national bank charters from the OCC.”

OCC is appealing the district court’s decision to the U.S. Court of Appeals for the Second Circuit, and the acting comptroller of the currency indicated in June that the OCC is planning to unveil a similar non-depository payments charter special purpose national bank concept later this year.

Section 24(7) of the National Bank Act, however, has listed “receiving deposits” as one of the statutory powers of national banks since 1864. This means that there is a good chance that the Second Circuit will uphold the district court’s ruling that OCC’s non-depository fintech charter is not consistent with the National Bank Act.


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