Lacewell v. Office of the Comptroller of the Currency

• Decision Date: 03 June 2021
• Docket Number: No. 19-4271,August Term 2020,19-4271
• Citation: 999 F.3d 130
• Parties: Linda A. LACEWELL, in Her Official Capacity as Superintendent of the New York State Department of Financial Services, Plaintiff-Appellee, v. OFFICE OF the COMPTROLLER OF the CURRENCY, Michael J. Hsu, in His Official Capacity as Acting U.S. Comptroller of the Currency, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

999 F.3d 130

Linda A. LACEWELL, in Her Official Capacity as Superintendent of the New York State Department of Financial Services, Plaintiff-Appellee,

v.OFFICE OF the COMPTROLLER OF the CURRENCY, Michael J. Hsu, in His Official Capacity as Acting U.S. Comptroller of the Currency, Defendants-Appellants.^*

No. 19-4271

August Term 2020

United States Court of Appeals, Second Circuit.

Argued: March 9, 2021

Decided: June 3, 2021

Christopher Connolly, Assistant United States Attorney, (Benjamin H. Torrance, Assistant United States Attorney, on the brief), for Audrey Strauss, United States Attorney for the Southern District of New York, New York, NY, for Defendants-Appellants.

Barbara D. Underwood, Solicitor General (Steven C. Wu, Deputy Solicitor General, Matthew W. Grieco, Assistant Solicitor General, on the brief), for Letitia James, Attorney General of the State of New York, New York, NY, for Plaintiff-Appellee.^†

Before: Leval, Lynch, and Bianco, Circuit Judges.

Joseph F. Bianco, Circuit Judge:

Plaintiff-Appellee the Superintendent of the New York State Department of Financial Services ("DFS") brought this action against Defendants-Appellants the Office of the Comptroller of the Currency and the U.S. Comptroller of the Currency (together, the "OCC") to challenge the OCC's decision to begin accepting applications for special-purpose national bank ("SPNB") charters from financial technology companies ("fintechs") engaged in the "business of banking," including those that do not accept deposits.¹ DFS asserts that this decision, and the OCC regulation underlying it, exceed the OCC's statutory authority under the National Bank Act ("NBA" or the "Act"), 12 U.S.C. § 21 et seq. , because, in DFS's view, the "business of banking" as used in the NBA requires that national banks take deposits. The OCC moved to dismiss DFS's complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief could be granted, arguing, inter alia , that: (1) DFS lacks Article III standing; (2) DFS's claims are constitutionally and prudentially unripe; and (3) the term "business of banking" in the NBA is ambiguous and the OCC's interpretation of that term to include institutions that do not accept deposits is reasonable, such that it is entitled to Chevron² deference. The United States District Court for the Southern District of New York (Marrero, J. ) denied the OCC's motion and held, in relevant part, that DFS has Article III standing, that its claims against the OCC are ripe both under the U.S. Constitution and as a matter of prudence, and that the OCC exceeded its authority under the NBA because the Act unambiguously requires national banks to engage in deposit-taking. After the parties agreed that no further factual development was required in light of these holdings, the district court entered judgment in favor of DFS, setting aside the OCC's decision to accept SPNB charter applications from non-depository fintechs nationwide.

We conclude that DFS lacks Article III standing because it failed to allege that the OCC's decision caused it to suffer an actual or imminent injury in fact, and we find that DFS's claims are constitutionally unripe for substantially the same reason. Accordingly, we REVERSE the amended judgment and REMAND to the district court with instructions to enter a judgment of dismissal without prejudice.

BACKGROUND

I. The Dual Banking System

Financial institutions in the United States operate within a "dual banking system." Wachovia Bank, N.A. v. Burke , 414 F.3d 305, 314 (2d Cir. 2005) ("States have a legitimate role in regulating certain banking activity, and it is often said that we have a ‘dual banking system’ of federal and state regulation."); accord Watters v. Wachovia Bank, N.A. , 550 U.S. 1, 15 n.7, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007). Within that system, both federal and state governments are empowered to charter banks and to regulate the banks holding their respective charters. Thus, banks with national banking charters are primarily supervised by federal regulators, and banks with state charters are largely, though not exclusively, subject to state regulation.

On the federal side, the OCC is the bureau of the U.S. Department of the Treasury "charged with assuring the safety and soundness of, and compliance with laws and regulations, fair access to financial services, and fair treatment of customers by, the [federally-chartered] institutions and other persons subject to its jurisdiction." 12 U.S.C. § 1(a). In New York, DFS is the state agency responsible for "the enforcement of [New York's] insurance, banking and financial services laws." N.Y. Fin. Serv. Law § 102 ; see also id. § 102(c) (listing one of DFS's "goals" as "provid[ing] for the effective and efficient enforcement of [New York's] banking and insurance laws"). Among other duties, DFS is responsible for supervising more than 200 New York-licensed state and international banks (with assets of around $2.5 trillion), as well as approximately 600 non-bank financial services companies (with assets of around $1 trillion).

II. Statutory and Regulatory Context

Under the NBA, the OCC has been granted the power to charter national banks. Specifically, the NBA's "[c]ertificate of authority to commence banking" section provides that:

If, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the Comptroller ... it appears that [an entity applying for a federal banking charter] is lawfully entitled to commence the business of banking , the Comptroller shall give to such association a certificate ... that such association has complied with all the provisions required to be complied with before commencing the business of banking , and that such association is authorized to commence such business.

12 U.S.C. § 27(a) (emphases added). Although the term the "business of banking" is not defined in the NBA, the Act does specify that once a bank receives a federal charter—and thereby becomes a national bank—

it shall have power ... Seventh[,] [t]o exercise ... all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits ; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes ....

Id. § 24(Seventh) (emphasis added).

In 2003, the OCC amended one of its regulations to give itself the ability to issue SPNB charters.³ See Rules, Policies, and Procedures for Corporate Activities; Bank Activities and Operations; Real Estate Lending and Appraisals, 68 Fed. Reg. 70,122, 70,126 (Dec. 17, 2003). Specifically, the amended regulation provides:

The OCC charters a national bank under the authority of the National Bank Act of 1864 .... The bank may be a special purpose bank that limits its activities to fiduciary activities or to any other activities within the business of banking. A special purpose bank that conducts activities other than fiduciary activities must conduct at least one of the following three core banking functions: Receiving deposits; paying checks; or lending money.

12 C.F.R. § 5.20(e)(1)(i) (" Section 5.20(e)(1)(i)") (emphasis added). By that amendment, the OCC expressly pronounced that it had the authority to issue national bank charters to institutions that do not receive deposits for the first time since the NBA was enacted in 1864.⁴

DFS alleges that, in March 2016, the OCC first contemplated issuing SPNB charters to non-depository fintechs⁵ and released a white paper wherein it "identifie[d] the impact of fast-paced developments in financial services technology as a much needed subject of regulatory inquiry." Joint App'x at 19. It then started the lengthy process of determining whether to issue SPNB charters to non-depository fintechs. More specifically, the OCC began by releasing an additional white paper in December 2016 titled "Exploring Special Purpose National Bank Charters for Fintech Companies," id. at 19–20, 46, which noted that "[a] question raised by technological advances in financial services and evolving customer preferences is whether it would be appropriate for the OCC to consider granting a special purpose national bank charter to a fintech company," id. at 48. The OCC also stated that its ability to grant SPNB charters to fintechs would be based upon Section 5.20(e)(1)(i), which, as mentioned supra , does not require deposit-taking. Further, it pointed out that "[s]tate law applies to a special purpose national bank in the same way and to the same extent as it applies to a full-service national bank," noting that "[e]xamples of state laws that would generally apply to national banks include state laws on anti-discrimination, fair lending, [and] debt collection," among others. Id. at 51.

Thereafter, the OCC received and, in March 2017, responded to comments from DFS and other interested parties concerning its plan to grant SPNB charters to fintechs—including those that did not receive deposits—set forth in its December 2016 white paper. In response to criticism that this plan exceeded the OCC's statutory authority under the NBA insofar as it enabled the OCC to grant SPNB charters to non-depository institutions, the OCC asserted that "[t]he [NBA] does not require that a bank take deposits in order to be engaged in the ‘business of banking.’ Rather, under the Act, performing only one of [either accepting deposits, paying checks, or lending money] is sufficient to be performing [the] core banking functions" required by Section 5.20(e)(1)(i). Id. at 132–33.⁶

On July 31, 2018, the OCC announced its final decision to accept applications from—and grant SPNB charters to—fintechs, including those that do not receive deposits, pursuant to Section 5.20(e)(1)(i) (the "Fintech Charter Decision"). In the press release announcing its decision, the OCC...