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Who's Down with OCC('s Definition of "Banks")?

By Matthew A. Bruckner (Howard University School of Law)

The number and importance of fintech companies, such as Venmo, CashApp, SoFi, Square, PayPal, and Plaid, continue to rise. As they’ve expanded, some fintech companies have considered it useful to pursue bank charters. For example, Figure, Varo and SoFi have all received at least preliminary approval for a traditional national bank charter.

However, the Office of the Comptroller of the Currency (the OCC) has decided to offer a special purpose national bank charters to entities that are, at best, bank-like.

In a new article, I explore the question of whether the OCC’s decision to grant bank charters to fintech companies makes them banks for bankruptcy purposes. The question matters because banks are ineligible for bankruptcy relief. This Article considers the legal and policy arguments that are likely to be presented to bankruptcy judges about whether special purpose national banks are banks within the meaning of the Bankruptcy Code. I conclude that bankruptcy judges are likely to disregard the OCC’s interpretation and conclude that special purpose national banks are not banks for bankruptcy purposes.

As non-banks, special purpose national banks are bankruptcy-eligible. This raises a host of issues. For example, in some cases, a special purpose national bank will be able to rush to bankruptcy court to take advantage of the automatic stay if the OCC tries to revoke its charter. Also, the bankruptcy process may supersede the OCC’s newly-created (and never yet used) special purpose national bank liquidation proceedings.

These and other issues are explored in more detail in the Article, which can be found here.

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Note: This is the Harvard Law School Bankruptcy Roundtable's last scheduled post for the summer of 2022.  The BRT intends to resume posting around mid-September.  The BRT wishes all its readers an enjoyable remainder of the summer!

Copyright © 2022 Harvard Bankruptcy and Corporate Restructuring Project, All rights reserved.


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