The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act” or the “Act”), signed into law in 2010, contains a series of regulatory reforms aimed in part to combat what was perceived as lax financial regulation that led to the recession of the late 2000’s. One way the Dodd-Frank Act seeks to tighten the reins on national banking institutions is by strengthening the legal standards for the preemption of state laws, thereby making it harder for banks to avoid liability under state law. Whereas prior to Dodd-Frank’s enactment, national banking institutions enjoyed heavy deference in the area of preemption of state laws, Dodd-Frank curbs this deference by requiring a case by case determination of preemption and requiring that a state consumer financial services law conflict with the exercise of a national bank’s powers before the state law can be preempted. Further, the Dodd-Frank Act strips subsidiaries of national banks of the same preemption protection enjoyed by national banks and subjects federally-chartered savings banks and federally-regulated savings associations to the same preemption standards as those applicable to national banks. The mandated “case by case” determination standard injects much uncertainty into the preemption analysis and ensures much preemption litigation for years to come.

In 1996, the Supreme Court set a conflict preemption standard for national banks in the case of Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner. In Barnett, the Court ruled that a state insurance law which prohibited national banks from selling insurance in certain towns in Florida was preempted by a 1916 federal law which authorized such actions because the state insurance law stood as an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Barnett was interpreted by the OCC to provide for preemption of state consumer protection statutes on a case by case basis under the standard of conflict preemption, where a state law is enforceable so long as it does not “prevent or significantly interfere with the national bank’s exercise of its powers.”