Appeals Court Rules In Favor Of Preemption

A federal appeals court has ruled that a Texas law prohibiting banks from charging non-account holders a check-cashing fee is preempted for national banks.

Judge Fortunato P. Benavides of the U.S. Court of Appeals for the Fifth Circuit in New Orleans said that Texas' "par value" law was in conflict with the National Bank Act. "National banks are authorized by federal regulation.to charge non-account-holding payees a check-cashing fee," he wrote.

"Because it prohibits the exercise of a power which federal law expressly grants national banks, par value is in irreconcilable conflict with the federal regulatory scheme, and is preempted."

Industry representatives hailed the decision for supporting the comptroller of the currency's power to override state statutes.

"This is another terrific decision affirming the extraordinarily broad preemptive effect of the National Bank Act," said Howard Cayne, a partner with the law firm of Arnold & Porter here who helped argue the case.

- From CU Journal Reports.