OCC Dodd-Frank Preemption Rule is Final
The Office of the Comptroller of the Currency (OCC) recently issued a final rule regarding amendments to its regulations, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). With respect to the provisions affecting preemption and visitorial powers, the OCC concluded that Dodd-Frank does not create a stand-alone preemption standard but incorporates the Supreme Court’s Barnett Bank conflict preemption standard and the reasoning that supports it.
Earlier this Summer, the OCC issued a proposed rule that Dodd-Frank’s preemption provision be read to include “the whole of the conflict preemption analysis” in Barnett Bank. In response, the Department of the Treasury issued a comment letter, addressing concerns with the OCC’s interpretation of Dodd-Frank preemption.
The Treasury Department raised three principal concerns with the OCC’s proposed rule: 1) that the OCC inappropriately broadened the key language of Dodd-Frank’s preemption standard to encompass Barnett Bank, 2) that although the proposed rule eliminates the OCC’s current preemption standard, the rule asserts that preemption determinations based on that eliminated standard would continue to be valid, and 3) that the proposed rule could be read to preempt categories of state laws, even though the provisions of Dodd-Frank require that preemption determinations be made on a case-by-case basis.
In its final rule, the OCC acknowledged and responded to these concerns, but concluded that the proper interpretation of the preemption provision of Dodd-Frank preserves the Barnett Bank conflict preemption standard.
Editor's note: This article was co-written by Priscilla Taylor, a summer law clerk in the Firm's San Francisco office.
OCC Issues Interpretive Letter on Dodd-Frank Preemption
The Office of the Comptroller of the Currency last week released an important interpretive letter with a comprehensive overview of the OCC's views on how Dodd-Frank affects preemption, including visitorial powers.
The OCC also provided its view on possible confusion related to the Dodd-Frank preemption provision. Although Dodd-Frank specifically references the Barnett Bank preemption standard, it also references an apparent stand-alone conflict preemption standard: whether state law "prevents or significantly interferes with the exercise by the national bank of its powers." This provision mirrors language in Barnett Bank, but the statute's separate reference to it raised the question of whether Congress intended to create a new statutory preemption regime, or whether it simply intended to incorporate the Barnett Bank standard. The OCC concluded that Dodd-Frank's preemption provision should be read to include "the whole of the conflict preemption analysis" in Barnett Bank, along with its judicial and regulatory progeny.
11th Circuit Considers Dodd-Frank Preemption Provision
In one of the first cases to analyze the preemption standard contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in Baptisa v. JPMorgan Chase Bank, NA, the Eleventh Circuit affirmed the district court's dismissal of plaintiff's Florida state law claims as preempted by the National Bank Act.
In Baptista, plaintiff, a non-accountholder at Chase, presented a check for $242.48 to be cashed at a Chase branch. Chase cashed the check and charged her a $6.00 fee. Plaintiff filed a putative class action asserting that Chase's imposition of a fee for cashing the check violated Florida law and alleging two causes of action: (1) violation of Florida Statute § 655.85, a so-called par-value statute, which prohibits a bank from "settl[ing] any check drawn on it otherwise than at par"; and (2) unjust enrichment.
Chase moved to dismiss on three grounds: first, that Section 655.85 did not apply to plaintiff because that statute regulated only exchange fees between banks; second, that both of plaintiff's causes of action were preempted by the National Bank Act, 12 U.S.C. § 21 et seq.; and third, that plaintiff had failed to allege the essential elements of unjust enrichment. The district court granted Chase's motion to dismiss both causes of action, holding plaintiff's claims were preempted by 12 U.S.C. § 24 (Seventh), which among other things, grants banks the power to negotiate drafts, and 12 C.F.R. § 7.4002(a), a regulation promulgated by the Office of the Comptroller of the Currency (OCC) which states that a national bank may "charge its customers non-interest charges and fees, including deposit account service charges." Subsequent OCC interpretive letters have interpreted "customer" to include "any person who presents a check for payment."
(Still) Tracking Financial Regulatory Reform
As the scope and content of the Dodd-Frank Wall Street Reform and Consumer Protection Act is shaped in the regulatory process, follow the latest developments on the Federal Reserve's website tracking financial regulatory reform. The Fed is publicly reporting on meetings will taking place between the Board and the public--representatives of bank organizations, consumer groups, trade associations, researchers and academics on regulatory reform issues, including systemic risk, derivatives trading, interchange fees, and consumer financial protection, and related proposals for comment.
The Fed is also reporting on current and future milestones in the regulatory process. Among other significant events, the Fed, OTS, Office of the Comptroller of the Currency, and FDIC will issue a joint report to Congress and the Inspectors General of the participating agencies on the agencies' plans to implement the transfer of OTS authorities by March 2011.
"Wall Street Reform and Consumer Protection Act" Is Now Law
President Obama today signed the "Wall Street Reform and Consumer Protection Act," which will bring comprehensive changes to consumer financial services, and to consumer finance litigation, including mortgages, credit cards, retail credit, debt collection, arbitration, preemption, and auto finance. See details about the changes coming, as seen by the White House, and the President's signing remarks.
Conference Reaches Deal on Financial Regulatory Reform
The House-Senate Conference to reconcile financial regulatory reform reached a final agreement on the legislation on Friday. The "Dodd-Frank Wall Street Reform and Consumer Protection Act" calls for the creation of the Consumer Financial Protection Bureau, an independent agency to be housed at the Federal Reserve, with a broad mandate to regulate consumer financial services of virtually all types.
The Consumer Financial Protection Bureau will have an independent director appointed by the President and confirmed by the Senate, with an independent budget and independent rule writing, examination, and enforcement authority. The CFPB consolidates consumer protection responsibilities of the OCC, OTS, FDIC, Federal Reserve, NCUA, HUD, and the FTC. Among other things, the legislation also creates a new Office of Financial Literacy to disseminate information to consumers and a new consumer hotline for consumer questions.
The legislation also provides for significant changes to regulations regarding mortgage financing, including
- Requiring lenders to ensure a borrower's ability to repay;
- Prohibiting yield spread premiums and pre-payment penalties;
- Establishing new penalties for lender violations;
- Expanding regulation of "high-cost loans;"
- Requiring additional consumer disclosures for mortgages; and
- Establishing an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.
