State regulators have actually dropped a claim tough Figure Technologies’ bank charter application after the San Francisco fintech deserted a questionable component of its strategy.
Figure, which uses home mortgage refinancing loans and house equity credit lines, had actually used to end up being a nationwide bank, however one that did decline insured deposits and for that reason would not require deposit insurance coverage, throughout the subsiding days of the Trump administration.
If the Office of the Comptroller of the Currency had actually authorized Figure’s initial application, it would have permitted the business to get a few of the crucial advantages of being a nationwide bank, such as the capability to preempt state rates of interest limitations.
Figure also would have been able to avoid certain obligations that typically apply to national banks, such as oversight by the Federal Deposit Insurance Corp. and the Federal Reserve, and the need to comply with the Community Reinvestment Act.
The November 2020 application was widely seen as a test case. Industry insiders said that if Figure proved successful, other tech companies might have taken a similar approach.
But the application drew pushback from traditional banks and the Conference of State Bank Supervisors, which brought a lawsuit against the OCC. The plaintiffs and defendants in the suit have a long history of legal jockeying over the federal and state regulatory authorities.
The CSBS announced Thursday it was dropping the case after Figure amended its application to seek deposit insurance.
“The federal banking laws are clear. Financial service companies, like Figure, that send and receive customers’ money or lend money, must obtain FDIC insurance in order to operate under a federal bank charter,” the group’s executive vice president, Margaret Liu, said in a press release.
One day after the suit was withdrawn, the OCC issued a statement saying that Figure’s amended application envisions the company applying for deposit insurance from the FDIC and seeking the Fed’s approval to become a bank holding company.
The OCC maintains that it has the ability to charter an uninsured institution, including one that takes deposits, according to the agency’s statement. Under Figure’s original application, the company had proposed taking uninsured deposits of over $250,000.
“I am pleased that the OCC can now consider Figure’s application without the cloud of a lawsuit,” acting Comptroller Michael Hsu stated in the declaration. “The amendments to Figure’s banking applications, if approved, will help ensure that the innovative activities engaged in by the bank are done in a safe, sound, and responsible manner, on a level playing field and fully within the bank regulatory perimeter.”
“There requires to be less regulative competitors and more coordination,” Hsu stated. “We must modernize the regulatory perimeter as a prerequisite to conducting business as usual with firms interested in novel activities.”
“Modernizing the bank regulatory perimeter cannot be accomplished by simply defining the activities that constitute ‘doing banking,’ but will also require determining what is acceptable activity to be conducted in a bank,” Hsu added. “Consolidated supervision will help ensure risks do not build outside of the sight and reach of federal regulators.”
Last month, Figure’s basic counsel, Ashley Harris, informed BankingDive that the business chose to modify its bank charter application in an effort to conserve time.
“We still feel like the law would have come out on our side if it were to go through litigation, but we just don’t want to continue to wait for that to happen,” Harris stated.