The Fourth Circuit vacated and remanded a lower court’s decision, holding that the repossession provisions in Maryland’s Credit Grantor Law are not subject to federal preemption. Plaintiff entered into a retail sales installment contract for the purchase of a used vehicle. Defendants repossessed the vehicle after plaintiff failed to make payments. Defendants sent plaintiff a notice stating that the vehicle would be sold at a private sale and that she had a right to redeem the vehicle. However, as required under the Credit Grantor Law, the notice did not disclose the location of the vehicle or the time and place where it was to be sold.
Plaintiff filed a putative class action against defendants alleging violations of the Credit Grantor Law. Defendants moved to dismiss the class action for failure to state a claim, alleging the relevant provisions of the statute were preempted by the National Bank Act and its implementing OCC regulations. The lower court ruled in favor of defendants and dismissed the class action. Plaintiff appealed.
The Fourth Circuit reversed the lower court’s dismissal based on federal preemption for a number of reasons. First, the OCC regulations do not expressly preempt state repossession laws. Second, citing Aguayo v. U.S. Bank, 653 F.3d 912 (9th Cir. 2011), the Court concluded that the National Bank Act and OCC regulations do not “occupy the field” of lending-lending regulation because the OCC has “explicitly avoided full field preemption in its rulemaking” and had not “been granted full field preemption by Congress.” Third, preemption was not appropriate because repossession rights are granted to national banks under state law, not federal law.
The Fourth Circuit rejected defendants’ argument that the power granted by the National Bank Act to make loans included the power to collect on the loans and, therefore, “preemption is implied.” The Court noted that in the OCC regulations, debt collection and extension of credit are related, but treated differently. In reaching it decision, the Court also pointed to the U.S. Supreme Court’s recognition that national banks are subject to state debt collection laws. See National Bank v. Commonwealth, 76 U.S. 353 (1869). Click here for the Fourth Circuit’s opinion.