Issue

The need for national standards (resting upon a preemption for federally chartered institutions) for banks that offer consumer financial services and lending across state lines.

Position Statement

ABA is a strong advocate for the dual banking system.  Just as that means preservation of the responsibilities of state banking supervisors over their chartered institutions, that also includes preservation of the ability of federally chartered banks to continue to enjoy applicable federal preemptions, including the ability to offer home mortgage loans and other financial products to consumers without having to comply with varying state and local requirements that may diminish the efficient provision of credit to consumers. We oppose efforts by states and other jurisdictions to impose different or additional requirements on those institutions (including their operating subsidiaries) operating in multiple states with a federal or national charter.

Explanation

As a result of improvements in technology, changes to the interstate branching laws, consolidation of the financial services industry, and the growing demand by consumers for interstate financial services, banks to a greater extent are offering products and services across state lines. As this happens, variations in required state and local disclosures and compliance requirements may negatively impact the ability of banks to offer an array of products or to do business in certain geographic areas. Further, the cost of products may be higher to the extent that multiple compliance requirements must be met. These additional costs will be borne by the consumer.

Institutions with a national charter, either national banks or federal savings associations, are able to rely, to varying degrees, on federal laws in their lending and other business lines. The OCC and the OTS have recognized that state laws that do not govern the business of banking – such as the laws governing contracts, torts, foreclosures, and bankruptcy -- are unlikely to pose a conflict with the exercise of a federal power and, therefore, they are not preempted as a general matter.

Consumer advocates, state banking authorities, and other state officials are concerned that a uniform national standard will not provide enough protection for the consumers in the state. It will be important for the federal and state banking agencies to coordinate efforts to ensure that customer complaints can be addressed properly with effective mechanisms for resolving the consumer concerns promptly.

ABA has supported the OTS and the OCC in their efforts, but we will continue to work with state authorities to ensure that the value of the state bank charter is an attractive chartering option. To the extent that a federal standard of disclosure has been developed, ABA will work to encourage that additional or divergent requirements will not be required on a state-by-state basis for the same activity, product, or service.

Contact for further information: Cathy McTighe (202) 663-5331,