New York DFS Sues OCC Again Over Fintech Bank Charter

On September 14, 2018, the New York State Department of Financial Services (NYDFS) renewed its legal challenge against the Office of the Comptroller of the Currency (OCC) over the OCC's plan to grant special-purpose national bank charters to fintech companies. The lawsuit argued that the OCC lacked authority to issue charters to non-depository institutions engaged in lending, payments, or money transmission. NYDFS contended that such charters would undermine state regulatory oversight and consumer protections.

The dispute was central to the evolving regulatory landscape for fintechs seeking to operate with bank-like capabilities, a core enabler of Banking-as-a-Service models. If the OCC's charter had been upheld without challenge, it could have allowed fintechs to bypass state-by-state licensing requirements, fundamentally altering the BaaS and embedded finance ecosystem. The case highlighted the tension between federal and state regulators over who governs non-traditional banking entities.

The outcome would influence how fintech-bank partnerships and BaaS providers structured their regulatory compliance for years to come.