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10.21 Preemption of State Law and State Enforcement

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10.21 Preemption of State Law and State Enforcement

The following links provide expanded analysis within this section:

10.21.   Preemption of State Law and State Enforcement.


                        10.21.1 Greater State Law Protection Is Not in Conflict with the Act.   The substantive consumer protection provisions in Title X, and the regulations issued by the Bureau do not prevent State laws and regulations that afford "greater protection" to consumers, as determined by the Bureau.  However, such State laws may continue to be preempted by the National Bank Act or the HOLA if they violate the applicable preemption standards.  Finally, if a majority of the States enact a resolution in support of a consumer protection standard, the Bureau is to issue a notice of proposed rulemaking to implement that standard.[§1041]

                        10.21.2.              State Civil Enforcement of Federal Laws Through Courts.  A State Attorney General (or similar State official) may bring an action in Federal District Court or State court to enforce the consumer protection provisions of Title X including regulations issued by the Bureau.  In such a proceeding, the Attorney General may secure remedies authorized by Title X or authorized by any other provision of Federal or State law.  With respect to national banks and Federal savings associations, a State Attorney General may bring an action to enforce the Bureau's regulations, but not the underlying statute. A State Attorney General may also bring an action to enforce any other applicable State or Federal law against a national bank or Federal savings association.[§§1042(a); 1047]

A State regulator (other than an Attorney General) may also enforce Title X and the Bureau's regulations against a State-chartered, incorporated or  licensed entity, or against any entity that is authorized to do business under State law.[§ 1042(a)]

10.21.3.            Preservation of Existing Contracts.  Title X and the Bureau's regulations will not be construed to alter or affect the applicability of any OCC or OTS regulation, order or interpretation regarding the applicability of State law to any contract entered into on or before the date of enactment by a national bank, Federal thrift, or subsidiaries thereof. [§1043]

10.21.4.            Preemption Standard for National Banks and Federal Savings Associations.    Title X provides that a State consumer protection law is preempted if: (i) application of the law would have a discriminatory effect on national banks or Federal savings association; (ii) the law is preempted by a provision of Federal law other than the National Bank Act; or (iii) in accordance with Barnett Bank v. Nelson, the State law "prevents or significantly interferes" with the exercise of a national bank of its powers.  If asked to make a preemption determination, the OCC must act on a "case by case" basis, meaning that the OCC determination must relate to a particular State law, but can also relate to the laws of another State with substantively equivalent terms (after consulting with the Bureau).   The same standards also apply with respect to Federal savings associations.  The Comptroller may not delegate to another the authority to issue a preemption determination.[§§1044; 1046]

10.21.5.            Judicial Review.  A preemption determination by the OCC is subject to judicial review.  However, rather than giving the agency "Chevron" deference, the court is directed to assess the validity of the preemption determination, depending upon the thoroughness evident in the agency's consideration, the reasoning of the agency, the consistency of the decision with other determinations, and other factors the court may find persuasive.  Further, the court may not uphold a determination to preempt a State law unless it finds that the determination is supported by substantial evidence, made on the record of the proceeding.  1044]

10.21.6.            Usury and Interest.  The new preemption provisions do not affect the current authority of national banks to establish and export interest rate ceilings.  1044(f)]

10.21.7.            Subsidiaries, Affiliates and Agents.  State consumer financial laws apply to national bank subsidiaries, affiliates and agents.[§§1044(e); 1045]