Last week's Supreme Court decision in Cuomo v. the Clearing House Association and OCC marks a significant victory for states and consumers after many years of preemption court losses over such issues involving insurance, operating subsidiaries and third-party bank agents. But banking isn't a zero-sum game, and what's good for states and consumers isn't necessarily bad for the financial services industry.
Prior court decisions on a variety of preemption-related issues had the unfortunate effect of encouraging the Office of the Comptroller of the Currency and Office of Thrift Supervision to adopt ever broader interpretations of the National Bank Act and the Home Owner's Loan Act, respectively. Agency position on preemption, in turn, fueled new litigation by some in the federally-chartered financial services industry aimed at moving out the edges of an already expansive doctrine. These efforts posed problems for the industry in at least two ways.