Consumer Financial Services Alert - May 31, 2011

The OCC issued a proposed rule to implement many provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the preemption and visitorial powers provisions.

The proposal would amend, but in some ways substantially preserve, the current preemption rules that apply to national banks.

The proposal follows a letter from the OCC to Senator Carper reported in the last edition of the Alert, in which the OCC explained that it intended to employ a conflict preemption analysis in interpreting Dodd-Frank’s Barnett preemption standard. In so doing, the OCC would remove language from its current preemption rules providing that “state laws that obstruct, impair or condition” a national banks powers are preempted. Significantly, however, the proposal would generally preserve preemption of the types of state laws enumerated in the current preemption rules. Thus, for example, the list of types of state mortgage lending laws subject to preemption in the OCC regulations at 12 C.F.R. § 34.4(a) would remain in tact. These types of preempted state laws include, among others, licensing, terms of credit, escrow accounts, disclosure and advertising, processing, origination, disbursement, repayment, and servicing. In its proposal, the OCC states that it has reviewed these types of state laws and confirmed that they are consistent with the standard for preemption in Barnett.

In addition, the proposal would:

• Explicitly provide that national bank and national bank operating subsidiary preemption standards apply equally to federal savings banks and their operating subsidiaries;
• Eliminate preemption of state laws for national bank and federal savings bank operating subsidiaries, affiliates and agents;
• Change the OCC’s visitorial powers rule to conform with the Supreme Court’s decision in Cuomo v. Clearing House Assn. L.L.C., 129 S. Ct. 2710 (2009), as adopted by Dodd-Frank, by permitting state attorneys general to bring enforcement actions in court to enforce non-preempted state laws against national banks; and
• Expressly provide that the national bank visitorial powers rule also applies to federal savings banks.

Comments on the proposal must be received by June, 27, 2011. Click here for the proposal.

As required by Dodd-Frank, the Consumer Financial Protection Bureau published for public comment a proposed list of rules and orders it would enforce. Comments are due by June 30, 2011. Click here for the rule.

The Consumer Financial Protection Bureau announced the Know Before You Owe initiative, an effort to combine the Truth in Lending Act mortgage disclosures and the Real Estate Settlement Procedures Act Good Faith Estimate into a single form. The Bureau has started testing two different prototype forms. The testing precedes the Bureau’s formal rulemaking process and involves soliciting feedback from consumers, lenders, and brokers. The Bureau is required by Dodd-Frank to issue the combined disclosures and implementing regulations by July 2012 for formal notice and comment. Click here to access the mortgage disclosure prototypes.

The FRB issued a proposed rule that would amend Regulation E and its Official Staff Commentary. The proposal contains new protections for consumers who send remittance transfers to consumers or entities in a foreign country by providing consumers with disclosures and error resolution rights. The proposal implements statutory requirements set forth in Dodd-Frank. Comments on the proposal must be received by July 22, 2011. Click here for the proposal.