State banking regulators are taking the Office of the Comptroller of the Currency to court over its proposal to establish a special-purpose national bank charter for financial technology companies.

(Related: Fintechs Can Apply for Special Purpose Charter, but Should They?)

In the lawsuit filed Wednesday in federal district court in Washington, D.C., the Conference of State Bank Supervisors, which represents state-chartered banks nationally, claims that the OCC’s charter proposal violates the National Bank Act and other federal banking laws.

In the lawsuit, which appears to be the first filed against the OCC over the proposal, the state banking regulators accuse the OCC of overstepping its authority under the National Bank Act. The state regulators claim the comptroller’s office, led by Thomas Curry, lacks authority to create a special-purpose charter without approval from Congress.

“When the OCC has attempted to issue a charter to entities that would not carry on the ‘business of banking,’ the courts have struck down those efforts,” wrote the CSBS’ attorneys in the suit.

In its draft fintech charter, published in March, the OCC proposed to charter fintech companies in the “business of banking,” but will not include institutions that receive deposits. The CSBS claims in its lawsuit that the federal banking agency should receive express statutory authorization to take such an action.

“The reason why we felt the need to weigh in on this issue the way we did is we saw significant harm to the marketplace and for consumers,” Margaret Liu, deputy general counsel for CSBS, told The National Law Journal.

The organization previously submitted a response letter during the public comment period for the OCC’s draft guidelines for fintech charters, which closed April 14. But Liu said the organization decided to file suit because it did not feel its concerns would be heard through comments alone.

“We don’t feel like the OCC has the legal authority to do what they’re doing,” Liu said, “but the OCC has no obligation to respond [to public comments].”

In the CSBS comment letter submitted by its president and CEO John Ryan, he wrote: “If Congress had intended for the OCC to charter national nonbanks, Congress would have specifically authorized the granting of special purpose nonbank charters and made clear how federal banking laws would apply to such nonbanks. … The OCC is fundamentally in error when it asserts that a nondepository institution, upon receiving OCC approval for a nonbank charter, ‘becomes a national bank subject to the laws, regulations and federal supervision that apply to all national banks.’”

The CSBS separately issued a press release on Wednesday arguing that “if the OCC is allowed to proceed with the creation of a special purpose nonbank charter, it will set a dangerous precedent that any federal agency can act beyond the legal limits of its authority.”

OCC spokesman Bill Grassano said the agency does not comment on active or pending litigation.

Jennifer Semko, a partner at Baker McKenzie, who filed the complaint on behalf of CSBS, deferred comments to the CSBS.

New York State Department of Financial Services superintendent Maria Vullo voiced her support of the lawsuit in a statement.

“New York and other states are the cradles of innovation,” she wrote. “The creation of an OCC national charter will stifle rather than encourage innovation; it would be an avenue for large, dominant firms to control the development of technology solutions in the financial services industry, thereby harming existing community banks and small businesses seeking to serve local communities.”

— Read World’s Best Cities to Launch a Fintech Firm: Deloitte Report on ThinkAdvisor.