Alert March 20, 2012

District Court Holds State Consumer Protection Act Not Preempted by the Dodd-Frank Act

The District Court for the Northern District of West Virginia reversed a bankruptcy court decision, holding that West Virginia’s consumer protection statute is not a “state consumer financial law” subject to preemption under the Dodd-Frank Act.  The plaintiffs alleged that defendant violated the Consumer Credit and Protection Act by continuing its collection calls after being informed by bankruptcy counsel that plaintiffs had retained counsel.

The Court noted that the Dodd-Frank Act revamped preemption under the National Bank Act and provides three instances in which state consumer financial laws are preempted: (1) discriminatory effect on national banks compared with the effect of the law on a state-chartered bank; (2) prevention or significant interference with a national bank’s exercise of its powers; and (3) preemption by a federal law. The Court held that the Consumer Credit and Protection Act is not preempted by the National Bank Act because it “was not designated to regulate financial transactions or accounts, but rather to protect West Virginia residents from unfair or abusive collection practices.” Click here for the opinion.