Alert September 23, 2008

Federal Appeals Court Rules State Law Regulating Facilitators of Refund Anticipation Loans Preempted by National Bank Act

The Second Circuit held that a Connecticut state law regulating “facilitators” of tax refund anticipation loans is preempted by the National Bank Act when the facilitators – typically tax preparers – partner with a national bank which makes the loans. The Court rejected the State’s argument that the law did not raise federal preemption concerns because it regulated only the tax preparer and not the bank. The Court held the law preempted because even if it did not directly regulate the bank, it “significantly interferes with a national bank’s ability to carry on” regulated activity – here, the amount of interest it could charge on loans. Click here for a copy of Pacific Capital Bank, N.A. v. State of Connecticut, No. 06-4149-CV (2nd Cir. September 12, 2008).