Earlier this month, Judge Marrero denied a motion to dismiss a complaint brought by the New York State Department of Financial Services (DFS) against the U.S. Comptroller of the Currency (OCC).  The complaint challenged the Comptroller’s decision to begin issuing special purpose national banking (SPNB) charters to financial technology (“fintech”) companies that, among other things, exempted the companies from certain federal liquidity and capitalization standards.  DFS argued that the charters undermined New York’s ability to regulate and protect its financial markets.  The Comptroller moved to dismiss, arguing that DFS had not suffered an Article III injury, that the action was not ripe because no SPNB charter applications had been received from fintech companies yet, and that DFS failed to state a claim under the Tenth Amendment.

Judge Marrero rejected the Comptroller’s ripeness argument, finding that DFS’ complaint was appropriate for review:

As a result of the Fintech Charter Decision, New York State’s regulations for over “600 non-bank financial services firms” are all at risk of becoming null and void.  Of course, certain steps, namely the application for, and then the granting of, an SPNB charter must occur before a fintech firm can flout New York’s laws. But those steps do not stymie DFS’s standing. For both steps, DFS benefits from the supposition that the government enforces and acts on its recent, non-moribund laws.  Specifically, DFS alleges that OCC has invited fintech companies to its offices to discuss SPNB charters, potentially indicating at least some demand for, and interest in, such charters — an allegation that the Court takes as true for the purposes of this motion.  This alleged interest, coupled with the common-sense observation that OCC spent numerous years developing the Fintech Charter Decision and coordinating its creation with other federal banking regulators, indicates that OCC has the clear expectation of issuing SPNB charters . . . In light of these expectations, DFS has demonstrated a “substantial risk that the harm will occur.”

Judge Marrero found that DFS did not state a claim under the Tenth Amendment, as there was no question that the Comptroller was allowed to grant charters to non-depository banks (like fintech companies) based on Congress’ broad grant of power to the Comptroller:

Importantly, DFS does not allege that, in and of itself, the issuance of SPNB charters to non-depository fintech institutions [] would exceed th[e] broad federal authority [to issue banking charters]. To be sure, Congress has previously chosen to permit OCC to charter non-depository national banks in the specific cases of trust banks and bankers’ banks, and DFS does not contest the constitutionality of those legislative choices. Rather, DFS claims that OCC has violated the Tenth Amendment because federal law preempts state law only when “Congress has clearly expressed its intent,” and here “Congress did not authorize OCC to charter fintech companies that provide non-depository financial services;” therefore, DFS contends, Congress “did not intend to preempt state regulation of such entities.”  Hence DFS’s own pleading indicates that the operative question is not whether the federal government has the power to take the action challenged in this case, but whether Congress has, in fact, exercised that power.  For this reason, the Court finds that DFS fails to state a Tenth Amendment claim . . . . [A] claim that turns on whether Congress articulated its choice with sufficient clarity simply does not implicate the Tenth Amendment.

Judge Marrero ordered the parties to set an expedited case schedule, including scheduling a trial after not more than sixty days of discovery.