The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Act) dramatically changed the financial regulatory landscape with broader and more stringent consumer financial protection laws. But one area that the Act does not appear to have changed is National Bank Act (NBA) preemption of state consumer financial laws.
Federal preemption of state laws is important because preemption allows national banks to adhere to one set of federal consumer protection standards instead of 50 state standards. The Dodd-Frank Act provides that the NBA preempts specified state consumer financial laws only if the state law:
- discriminates against national banks;
- “prevents or significantly interferes” with the exercise of a national bank’s powers “in accordance with the legal standard for preemption” set forth by the Supreme Court in Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996); or
- is preempted by other federal law.
The second provision worried banks and caused much debate in Congress because consumer advocates sought in the legislative process to establish a new, higher standard for NBA preemption than prior to the Dodd-Frank Act. These concerns have been eased in the year since the Dodd-Frank preemption provisions became effective. Instead of heightening the preemption standard, the Office of the Comptroller of the Currency (OCC) and federal courts have generally interpreted the Act’s “prevents or significantly interferes” provision as merely clarifying the pre-existing preemption standard.
The OCC is the federal agency charged with interpreting the Dodd-Frank preemption provisions and supervising national banks. In a final rule issued in July of 2011, the OCC concluded that, “the Dodd-Frank Act does not create a new, stand-alone ‘prevents or significantly interferes’ preemption standard, but rather incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court’s Barnett decision.” In other words, the Act did not work any meaningful change in the standard for NBA preemption.
Importantly, most courts have thus far reached the same conclusion as the OCC.* Two district court opinions have included brief statements suggesting that Dodd-Frank may somehow have changed the NBA preemption standard, but neither of these courts ultimately made a definitive ruling on this basis.
In short, while it is still too early to say conclusively that the OCC’s view of the Dodd-Frank preemption provisions will prevail in the courts, the early signs are positive and consistent with the view that the Dodd-Frank Act did not change the NBA preemption standard.
* See, e.g., Baptista v. JP Morgan Chase, N.A., 640 F.3d 1194, 1197 (11th Cir. 2011) (treating the Act as having no effect on NBA preemption standards); U.S. Bank , N.A. v. Schipper, 812 F. Supp. 2d 963, 968 n.1 (S.D. Iowa 2011) (concluding that the Act “did not materially alter the standard for preemption the Court must apply”); Parks v. MBNA America Bank, N.A., 2012 WL 2345006 (Cal. June 21, 2012) (“In 2010, the Dodd-Frank Act codified the significant impair test articulated in Barnett Bank.”)