New York sues US to stop fintech bank charters

New York state's top banking regulator on Friday sued the federal government to void its decision to award national bank charters to online lenders and payment companies, saying it was unconstitutional and put vulnerable consumers at risk.

Maria Vullo, superintendent of New York's Department of Financial Services, called the July 31 decision by the Office of the Comptroller of the Currency to let financial technology companies, or fintech firms, obtain charters “lawless, ill-conceived, and destabilizing of financial markets.”

She said New York could best regulate those markets, but the OCC decision left consumers “at great risk of exploitation” by weakening oversight of predatory lending, allowing the creation of more “too big to fail” institutions, and undermining the ability of local banks to compete.

“The OCC's reckless folly should be stopped,” Vullo said in her complaint filed in the US District Court in Manhattan.

OCC spokesman Bryan Hubbard said in an email that the regulator, part of the US Department of Treasury, would vigorously defend its authority to grant national charters to qualified companies “engaged in the business of banking.”

Vullo's complaint joins a slew of litigation from regulators in Democratic-controlled or -leaning states challenging Trump administration policies.