May 16, 2011
Authored by: Bryan Cave
The OCC recently sent a letter to Sen. Tom Carper (D-Dela.) in response to his request for the OCC to clarify how it would interpret particular aspects of the preemption provisions of the Dodd-Frank Act. Among other things, the letter states that federal preemption of state consumer protection laws would continue even under Dodd-Frank, in accordance with the “Barnett” standard. Of particular interest, the OCC letter noted that Dodd-Frank did not overrule or reverse any pre-existing judicial decisions that were based on the Barnett standard and which found that the state law conflicted with bank powers.
The Dodd-Frank Act restricts the ability of national banks and federal savings associations to assert preemption from state consumer protection laws. For example, the ability to assert “field preemption” over an entire body of law (even if there is no conflict) no longer exists. However, contrary to some assertions, preemption is not “dead.” One way preemption would apply is when the state consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers, as established by the Supreme Court in the Barnett case.
In its letter, the OCC declares that this preemption standard as statutorily referenced in the Dodd-Frank Act is a “directive to apply the conflict preemption standard articulated in the Barnett decision.” However, the letter further adds that the OCC “recognizes that going forward, after the transfer date, the Dodd-Frank Act imposes new procedures and consultation requirements with respect to how [the OCC] may reach future preemption determinations, including the case-by-case requirement…” and specifically mentions that the OCC will be required to first consult with the Consumer Financial Protection Bureau prior to making its determination.