The Chief Counsel of the Office of the Comptroller of the Currency has issued Interpretive Letter 1173, addressing national bank and federal savings association preemption of state law under the Dodd-Frank Act.

The Interpretive Letter clarifies that the special Dodd-Frank preemption requirements for “preemption determinations” are limited as follows:

• “Preemption determinations” are confined to “affirmative conclusion[s] by the OCC that federal law preempts a state consumer financial law.”  They do not include “OCC action[s] that ha[ve] only indirect or incidental effects on a state consumer financial law.”
• The special requirements for “preemption determinations” only apply by their terms to determinations under the “Barnett standard” and not to determinations under the alternate “discriminatory effect” and “other federal law” preemption standards laid out by Dodd-Frank.  In this regard, the Interpretive Letter observes that 12 U.S.C. § 371, which applies to real estate lending, is not part of the National Bank Act and, accordingly, a determination that Section 371 preempts a state law is not limited by Dodd-Frank rules for “preemption determinations.”
• The special requirements for “preemption determinations” only apply to determinations addressing a “State consumer financial law”—defined as a “[s]tate law that does not directly or indirectly discriminate against national banks and that directly and specifically regulates the manner, content, or terms and conditions of any financial transaction (as may be authorized for national banks to engage in), or any account related thereto, with respect to a consumer.”  (In this regard, general state “UDAP” laws proscribing unfair and deceptive acts and practices seemingly fall outside the special Dodd-Frank rules for “preemption determinations.”)

The Interpretive Letter suggests two separate reasons why the OCC’s recent anti-Madden and “true lender” rules should not be subject to Dodd-Frank limitations on “preemption determinations.”  First, in a passage relevant to the OCC’s anti-Madden rule, which interpreted Section 85 of the National Bank Act (the “NBA”), the Interpretive Letter quotes Dodd-Frank that “[n]o provision of [the NBA] shall be construed as altering or otherwise affecting the authority conferred by section 85 . . . including with respect to the meaning of ‘interest.’”  It goes on to say: “Consequently, consistent with this provision, OCC interpretations of section 85 are not affected by, and therefore not subject to,” Dodd-Frank’s special rules of “preemption determinations.”

Second, the Letter observes that “interpretations of section 85 are interpretations of a federal authority granted to national banks, even though they may ultimately have some effect on the applicability of a particular state law (e.g., if an interpretation informs the determination of which state law governs under section 85).”  The point we take from this observation is that, whether the statute the OCC is interpreting is Section 85, as was the case with the anti-Madden rule, or 12 U.S.C. §§ 24, 371 and 1464(c), as with the “true lender” rule, interpretations of federal authorities are not “preemption determinations” at all, as defined in the Interpretive Letter.

Finally, the Interpretive Letter addresses the level of deference to which the OCC is entitled regarding preemption.  It acknowledges that, under Dodd-Frank, an OCC preemption determination is no longer entitled to special Chevron deference and instead receives more limited Skidmore deference, whether or not the determination is made under the Barnett standard and whether or not it addresses a “State consumer financial law.”  However, it argues that an OCC interpretation of the National Bank Act, as opposed to a determination that a state law is preempted, remains subject to Chevron deference.  Accordingly, the Interpretive Letter instructs that “the OCC is also entitled to Chevron deference for its interpretations” of the Dodd-Frank preemption rules (presumably including the analysis in the Interpretive Letter).

In the ongoing and anticipated future challenges to the anti-Madden and “true lender” rules, we expect the OCC to articulate many of the points it has laid out in the Interpretive Letter.