The New York State Department of Financial Services has sued the federal government to prevent awarding national bank charters to new fintech firms.
The lawsuit was filed by Department of Financial Services superintendent Maria Vullo against the Office of the Comptroller of the Currency (OCC).
In the lawsuit, the state regulator claimed that the decision to provide bank charters to the new fintech firms and online lenders increases the risk of exploitation of vulnerable customers.
On the other hand, OCC spokesman Bryan Hubbard in an email statement to Reuters said that the agency, as a part of the US Department of Treasury, would defend its right to issue national charters to qualified companies.
Earlier in July, OCC decided to issue national bank charters to eligible fintech firms.
Vullo said that the state of New York can regulate the market and OCC’s decision reduces surveillance capabilities.
She also added that it will also weaken the local banks as well as create multiple ‘too big to fail’ companies.
The national bank charter allows the fintech companies to operate across the US without requiring the need to obtain separate licences in each state.
It was argued that the step will encourage financial services across the country. However, opponents stated that such initiative will weaken government oversight over the industry and the participants.