New York state’s top banking regulator sued the federal government to void its decision to award national bank charters to online lenders and payment companies, saying the decision was unconstitutional and posed a threat to consumers.
According to Reuters, Maria Vullo, superintendent of New York Department of Financial Services called the Office of the Comptroller of Currency’s decision to allow fintech companies to obtain bank charters, “lawless, ill-conceived and destabilizing of financial markets.”
Vullo feels that states like New York can best regulate those markets and that the OCC decision leaves customers up a creek, in danger of exploitation with the threat of a return of “too big to fail” institutions and the inability of local banks to compete.
Vullo currently oversees more than 2,200 banks, financial services companies and insurers with about $7 trillion of total assets.
“Financial centers like New York, which have developed comprehensive and well-functioning regulatory bodies, should not needlessly bear the harmful brunt of an overreaching federal agency,” the complaint against the OCC said.
The OCC made the decision to offer charters to nonbank, fintech companies back in July citing customer needs and the potential for innovation as the primary catalysts for the edict.
“The decision to consider applications for special purpose national bank charters from innovative companies helps provide more choices to consumers and businesses and creates greater opportunity for companies that want to provide banking services in America. Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank,” Comptroller of the Currency Joseph Otting said in a statement.
“Providing a path for fintech companies to become national banks can make the federal banking system stronger by promoting economic growth and opportunity, modernization and innovation, and competition. It also provides consumers greater choice, can promote financial inclusion, and creates a more level playing ground for financial services competition,” he added.
Vullo was one of the first to speak out against the OCC decision, saying earlier this year that the NYDFS opposed the move. And now, New York is taking the federal government to court over the OCC's decision.
Vullo, New York Gov. Andrew Cuomo and the rest of New York’s government have been active this year, moving to counter rollbacks in corporate oversight they feel endangers consumers.
Earlier this year, New York became the first state to subject credit reporting agencies to direct oversight from its department of financial services. Cuomo made this move under the belief that federal regulation did not do enough to cur the potential of another Equifax-esque disaster.
At its heart, this complaint is the latest skirmish in a tooth-and-nail fight that has been raging between worried consumer protection agencies and the Trump administration as the administration has been rolling back consumer protection guidelines in favor of corporate independence.