Earlier this month, the Conference of State Bank Supervisors (CSBS) withdrew its lawsuit seeking to block the federal government from granting bank charters to fintech companies. This happened after the company at issue, Figure Technologies Inc., amended a controversial element of its business plan.
Back in 2020, when looking to get a national bank charter in place, Figure Technologies Inc. did not initially apply for deposit insurance from the FDIC. The CSBS sued the U.S. Office of the Comptroller of the Currency (OCC), arguing that granting national bank status to non-bank companies would defy states' authority to oversee non-bank lenders and that the OCC had exceeded its authority. In its defense, the OCC declared that a national bank does not necessarily need deposit insurance in place to operate as a national bank.
Last December, Figure updated its application, stating it would seek FDIC deposit insurance, complying as such with the legal requirement. The dropping of the lawsuit will end some of the debate between regulators regarding the fintech sector, and given the regulatory obstacles, fintech companies might now decide either to secure deposit insurance or not try to obtain a charter at all.