Alert July 26, 2011

OCC Issues Final Rule Implementing Dodd-Frank Preemption Provisions

The OCC issued a final rule last week implementing the changes to preemption standards and visitorial powers (the “Final Preemption Rule”) made by Sections 1044 to 1048 of the Dodd- Frank Act. The Final Preemption Rule became effective on July 21, 2011.

The OCC adopted the Final Preemption Rule in substantially the form originally proposed. A summary of the OCC’s proposed rule relating to preemption standards and visitorial powers was published in the May 31, 2011 Financial Services Alert. The OCC provided some important interpretive guidance related to the Final Preemption Rule in the adopting release that it issued as well as slightly modifying the text of the rule from the proposal, including the following items of note:

  • The OCC in its adopting release stated that it “concludes that the Dodd-Frank Act does not create a new, stand-alone ‘prevents or significantly interferes’ preemption standard, but rather, incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court’s Barnett decision.”
  • The OCC in its adopting release confirmed that precedent consistent with the Barnett standard, including existing OCC regulations, are “preserved.”
  • As proposed, the OCC eliminated from its preemption regulations any reference to preemption of a state law that “obstructs, impairs or conditions” the exercise of a national bank’s powers as authorized by Federal law. Significantly, the OCC stated that an existing preemption precedent that is “exclusively reliant” on this standard as the basis for a preemption determination “would need to be reexamined” to ascertain whether the determination is consistent with the Barnett standard. The OCC, however, went on to state that it “has not identified any OCC-issued preemption precedent that rested only on the ‘obstruct, impair or condition’ formulation.”
  • The OCC confirmed its belief that the procedural requirements applicable to an OCC determination that a state consumer financial law is preempted, apply prospectively and do not invalidate prior precedent.
  • The OCC confirmed that the elimination of preemption of state laws as applied to agents of a national bank does not affect activities conducted by employees of the bank.
  • The OCC revised the text of the Final Preemption Rule to clarify that impermissible visitorial powers exercised by a state attorney general or chief law enforcement officer would not include collecting information from sources other than the bank or from the bank through actions that do not constitute visitations or as otherwise authorized by Federal law. It also slightly modified the language of the Final Preemption Rule to clarify that a state attorney general or chief law enforcement officer may enforce any applicable law against a national bank (as opposed to a non-preempted state law) and to seek relief as authorized by that law. However, in the adopting release, the OCC noted that in the case of both non-preempted state law and Federal law, the law in question must provide authority for the state attorney general or chief law enforcement officer to enforce and seek relief as authorized under that law.