On September 25, 2017, the New York Department of Financial Services ("DFS") filed its opposition to the Office of the Comptroller of the Currency's ("OCC's") motion to dismiss the DFS's Complaint. At the heart of this lawsuit is the DFS's challenge to the OCC's authority to issue FinTech charters to companies that do not engage in the traditional banking activity of taking deposits. The OCC filed its motion to dismiss on August 18, 2017, alleging lack of jurisdiction and the DFS's failure to state a claim. The DFS's opposition last week signals another step in the escalating battle between the regulators to assert control over the FinTech industry.

In its opposition, the DFS argued that it had standing to challenge the OCC, because the OCC's decision to issue FinTech charters threatened to "encroach" on the DFS's "sovereignty" over non-depository institutions, traditionally regulated under state law. Moreover, the DFS alleged specific harm to New York consumers because the FinTech charters would "rob[] New York consumers of the protections afforded them under New York law."

The DFS also challenged the OCC's substantive argument that the OCC should be afforded deference to interpret its own authority under the National Banking Act ("NBA"). The DFS argued that the OCC's interpretation to allow itself regulatory authority over non-depository institutions was "unreasonable" and unsupported by a proper reading of the NBA. More dramatically, the DFS argued that the OCC's FinTech charters would "supplant[] a regulatory regime that has existed for almost 150 years and would fundamentally change the OCC's heretofore non-existent role in regulating non-depository financial institutions." As it stands, there is no sign that the tension between the regulators will ease anytime soon.

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