A federal appeals court on Friday upheld an Office of Thrift Supervision argument that a thrift's independent contractors are exempt from state licensing laws.

The U.S. Court of Appeals for the Sixth Circuit in Cincinnati overturned a lower court's ruling that the Home Owners Loan Act did not preempt state and local laws covering exclusive agents selling mortgage products for State Farm Bank.

State Farm Bank relies on its parent company's independent agents, who are not technically its employees but who exclusively sell its insurance and commercial retail banking products.

It has sought clarification on whether the agents must comply with state laws. In 2004, the OTS claimed in a legal brief that local laws were preempted for the thrift's agents.

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