OCC Clarifies Its Approach to Preemption Post Dodd-Frank Act

May 19, 2011 at 1:48 pm Leave a comment

In a letter to Senator Carper earlier this month, the Office of the Comptroller of the Currency (“OCC”) has provided important insights into its interpretation of the preemption provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and the related changes the OCC plans to propose to its preemption regulations.  The letter provides important details for what a national bank can expect from the OCC upon the effective date (July 21, 2011) of the Dodd-Frank Act, including: 

  • The OCC considers precedents that are consistent with the conflict preemption principles set forth in Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25 (1996) to be preserved under the Dodd-Frank Act.  These include judicial decisions, interpretations, and the OCC’s rules, where preemption was premised on Barnett-based principles of conflict preemption.  In its letter, the OCC specifically lists its preemption regulations on deposit-taking, lending and real estate lending (12 C.F.R. §§ 7.4007, 7.4008, 34.4) as OCC rules which were premised on Barnett-based principles and, therefore, will continue under the Dodd-Frank Act. 
  • Interpretation of the new Dodd-Frank Act provision regarding preemption of state consumer financial laws includes an analysis beyond the “prevent or significantly interfere” conflict preemption formulation.  This is only the starting point, and to be complete, the analysis must consider all of the conflict preemption principles in the Barnett decision.  A decision by the 11th Circuit in early May supports the OCC’s understanding, as the court cited other formulations of conflict preemption used in the Barnett decision for the conclusion that under the Dodd-Frank Act, the proper preemption test is conflict preemption (See Baptista v. JPMorgan Chase, N.A., No. 10-13105 (11th Cir. May 11, 2011)).
  • Preemption of state law for national bank subsidiaries, agents and affiliates is eliminated under the Dodd-Frank Act and therefore, the OCC plans to rescind 12 C.F.R. § 7.4006, the OCC’s regulation regarding such preemption.
  • The OCC will clarify that its regulations follow the conflict preemption principles of the Barnett decision by removing the “obstruct, impair or condition” formulation from its rules. 
  • The Dodd-Frank Act codified the Supreme Court’s decision regarding visitorial powers in Cuomo v. Clearing House Association, L.L.C., 129 S. Ct. 2710 (2009). Under the Dodd-Frank Act no limitation on visitiorial powers to which a national bank is subject may be construed to limit or restrict the authority of any state attorney general to bring an action against a national bank in a court of appropriate jurisdiction to enforce an applicable law and to seek relief as authorized by such law.  Accordingly, the OCC plans to revise 12 C.F.R. § 7.4000 to provide that such an action by a state attorney general (or other chief law enforcement officer) is not an exercise of visitorial powers under 12 U.S.C. § 484.

A complete copy of the OCC letter is available here.

Entry filed under: Client Alerts, Dodd-Frank Act.

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