Consumer groups have been critical of the Office of the Comptroller of the Currency for exempting national banks from certain state laws, a practice known as preemption.
Responding, the Department of the Treasury has proposed new procedures requiring the OCC to give notice and accept public comment before preempting most consumer-oriented laws or intrastate branching requirements. Treasury proposed that the rules be incorporated in the interstate branching bill.
Following are excerpts from language Treasury proposed to accompany the bill. Although the language refers frequently to congressional findings or beliefs, The comments are Treasury's. However, they were written with the hope that lawmakers would accept them as their own. In the text, the term conferees refers to the House and Senate representatives appointed to negotiate a final bill.
During the course of its consideration of the act, the conferees have been made aware of certain specific circumstances in which the federal banking agencies have applied traditional preemption principles in a manner the conferees believe is inappropriately aggressive, resulting in preemption of state law in situations where the federal interest did not warrant that result.
One example is OCC Interpretive Letter No. 572, dated January 15, 1992, from the OCC to Robert M. Jaworski, assistant commissioner, State of New Jersey Department of Banking, concluding that national banks doing business in New Jersey are not required to comply with the New Jersey Consumer Checking Account Act.
Federal Primacy Asserted
It is of the utmost concern to the conferees that the agencies issue opinion letters and interpretive rules concluding that federal law preempts state law regarding community reinvestment, consumer protection, fair lending, or establishment of intrastate branches, only when the agency has determined that the federal policy interest in the preemption result is clear.
In the case of Interpretive Letter No. 572, for example, it is the sense of the conferees that the fact the Congress authorized a study of the basic banking issue did not indicate that Congress intended to override state basic banking laws, or occupy the area of basic banking services to such an extent as to displace state laws, or that the existence of state basic banking laws frustrated the purpose of Congress in authorizing a study of the subject.
The conferees have similar concerns regarding the scope of the OCC interpretive rule that appears at 12 C.F.R. Section 7.8000, which broadly asserts that federal law governing the deposit-taking functions of national banks preempts any state law that attempts to prohibit, limit, or restrict deposit account service charges.
In light of the conferees' views regarding the proper application of recognized preemption standards, discussed above, and the decision of the Supreme Court of California in Perdue v. Crocker National Bank, 702 P. 2d 503 (Cal. 1985), the conferees urge the OCC to review Interpretive Ruling 7.8000 to determine if it should be withdrawn or revised.
State Action Cited
The conferees understand that in certain cases some states have imposed conditions on, or ohtained commitments from, bank holding companies in connection with a company's aquisition of banks outside its home state.
The act provides that such conditions or commitments existing as of the date of enactment of the Interstate Banking Efficiency Act of 1994 will continue to be enforceable against the bank holding company or an affiliated successor company to the same extent as they were previously its bank holding company with bank subsidiaries in more than one state chooses to combine its banks under section 105(d)(1). The act does not create any new state enforcement authority with respect to any conditions imposed or commitments made before the enactment of the act.
In view of the congressional concern regarding preemption of state law regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, the conferees concluded that a more open process for reaching preemption conclusions in these areas, with a clearly structured. meaningful opportunity for interested parties to communicate their views to the agency, was warranted.
Also, it is important that the agencies make their determinations on federal preemption of state law available to the public, in a timely and accessible manner. Accordingly, the act imposes certain procedural requirements on agency preemption opinion letters and interpretive rules in connection with state laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, whether or not related to interstate branching.
The conferees believe that the public notice and openness provided by the new process will be a vital safeguard to ensure that an agency applies the recognized principles of preemption in a balanced fashion.
The act provides that before issuing any opinion letter or interpretive ruling concluding that federal law preempts state law regarding community reinvestment, consumer protection, fair lending, or establishment of intrastate branches, the appropriate federal banking agency will publish notice in the Federal Register of the request, or of the agency's intention on its own motion, to determine whether federal law preempts a particular state law.
The notice should describe each state law in question and otherwise provide information sufficient to enable interested parties to comment meaningfully on the issue under consideration. The agency also should promptly make available upon request a copy of any incoming request letter. The act also requires the agency to publish in the Federal Register a copy of the final opinion letter or interpretive rule.
The act requires the agency to give interested parties not less than 30 days in which to submit comments. In establishing the length of the comment period, the conferees intend that the agencies should take into account the complexity of the preemption issue involved and the number of parties likely interested in responding to the solicitation of public comment and the resources of those parties.
The conferees also expect the agencies to be flexible in extending the Comment period if requested to do so by an interested party for good cause shown. The act further requires the agency to take the public comments into account in reaching its decision.
This process is not intended to confer upon the agency any new authority to preempt or to determine preemptive congressional intent in the four areas described, or to change the substantive theories of preemption as set forth in existing law. Rather, it is intended to help focus any administrative preemption analysis and to help ensure that an agency only makes a preemption determination when the legal basis is compelling and the federal policy is clear.