OCC Proposes New Bank Preemption Rules Under the Dodd-Frank Act


On May 25, 2011, the Office of the Comptroller of the Currency (OCC) proposed revisions to its rules on the scope of federal preemption of state laws with respect to national banks.1 The proposed rules implement critical elements of Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act or the Act).2 Under the OCC’s interpretation, the conflict preemption standard in the U.S. Supreme Court’s Barnett Bank decision, as incorporated in Title X, generally provided the foundation for prior OCC preemption determinations. Accordingly, the proposed rules make no major changes to the OCC’s existing preemption rules, except for those changes specifically mandated by the Act. The OCC’s restrained reading of the mandate in the Dodd-Frank Act may disappoint States Attorney Generals and consumer groups, who seem likely to argue for a broader rollback of federal banking preemption.

Generally, the Dodd-Frank Act and the proposed rules:

• Eliminate preemption of state laws for national bank subsidiaries, agents and affiliates;

• Conform the preemption and visitorial powers standards for federal savings associations to those applicable to national banks;

• Articulate standards for determining when ‘‘state consumer financial laws’’ are preempted that incorporate the Barnett Bank standard for conflict preemption;

• Impose new procedures and consultation requirements for OCC preemption determinations;

• Require the OCC to conduct periodic reviews of its preemption determinations; and

• In accordance with the Cuomo decision, provide that a court action by a state law enforcement officer to enforce non-preempted state law is not an exercise of visitorial powers.

Comments on the proposed rules are due by June 27, 2011. The OCC expects to issue final rules effective on or shortly after July 21, 2011. The OCC has not proposed any changes to the broader preemption regulations of the Office of Thrift Supervision that currently apply to federal savings associations, but has stated its intention to propose such changes later in 2011.3 Since the Act requires that preemption rules relating to federal savings associations comply with those applicable to national banks, the rules for federal savings associations will mirror those for national banks.

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