State regulators have dropped a lawsuit challenging Figure Technologies’ bank charter application after the San Francisco fintech dropped a controversial element of its plan.
Figure, which offers mortgage refinancing loans and home equity lines of credit, had applied to become a national bank, but one that did not accept insured deposits and therefore would not need deposit insurance, during the waning days of the Trump administration.
If the Office of the Comptroller of the Currency had approved Figure’s original application, it would have allowed the company to obtain some of the key benefits of being a national bank, such as the ability to preempt state interest rate limits.
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 suit against the OCC.
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.
Figure’s general counsel, Ashley Harris, told BankingDive last month that the company had refiled an amended application with the OCC, and that it was planning to file applications with the FDIC and the Fed once the OCC provides conditional approval.
She also said that Figure decided to amend its application to save 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 said.
