OCC Adopts Final Rule on Federal Preemption and State Visitorial Powers Applicable to National Banks and Federal Savings Associations
On July 21, 2011, the Office of the Comptroller of the Currency (“OCC”) issued a final rule implementing several provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), including revisions to the OCC’s rules on preemption and visitorial powers. These changes include amendments to OCC rules pertaining to preemption and visitorial powers, as well as the transfer of authority for the ongoing examination, supervision, and regulation of federal savings associations to the OCC from the Office of Thrift Supervision.
The preemption and visitorial powers amendments:
- Eliminate preemption for operating subsidiaries of national banks and operating subsidiaries of federal savings associations;
- Apply to federal thrifts the same preemption standard – that is, a conflict preemption standard and not an occupation of the field standard – as applies to national banks, and apply to Federal thrifts the visitorial powers standards applicable to national banks;
- Eliminate ambiguity concerning the preemption standards in OCC regulations by removing language from OCC rules that provides that state laws that "obstruct, impair, or condition" a national bank's powers are preempted. This change conforms the regulations to the standard announced by the Supreme Court in Barnett Bank v. Nelson, 517 U.S. 25 (1996), and adopted in Section 1044 of the Act, which provides that a state law is preempted if it prevents or significantly interferes with a national banks' exercise of its powers, discriminates against national banks, or is preempted by other federal laws; and
- Revise the OCC's visitorial powers rule to conform to the Supreme Court's decision in Cuomo v. Clearing House Ass’n, 129 S. Ct. 2710 (U.S. 2009) recognizing the ability of state attorneys general to bring enforcement actions in court to enforce applicable laws against national banks as authorized by such laws.
In response to public comments received, the text of the preemption and visitorial powers amendments was revised to:
- Clarify that, going forward, federal savings associations will be subject to the same preemption standards that apply to national banks;
- Clarify the definition of “visitorial powers” in § 7.4000(a)(2)(iv) to include direct investigations of national banks, such as through requests for documents or testimony directed to the bank to ascertain the bank’s compliance with law through mechanisms not otherwise authorized under the rule; and
- Include in the final rule a provision stating that “[i]n accordance with the decision of the Supreme Court in Cuomo …, an action against a national bank in a court of appropriate jurisdiction brought by a state attorney general (or other chief law enforcement officer) to enforce an applicable law against a national bank and to seek relief as authorized by such law is not an exercise of visitorial powers under 12 U.S.C. 484.”
These changes apply to contracts entered into on or after July 21, 2010 (date of enactment). Dodd-Frank Act § 1043. Litigation over contracts entered into before that date will continue to be analyzed under the applicable, pre-existing common law analysis. The new rule changes the landscape for national banks and federal savings associations by subjecting them to state consumer law claims concerning origination and servicing of loans.
A copy of the OCC Final Rule is attached here.
Please do not hesitate to contact Jake Lutz, John Lynch, David Anthony, Mark Nagle, Jason Manning, Ethan Ostroff, or John Costello if you have questions.