M. Maureen Murphy
Legislative Attorney
On June 29, 2009, the U.S. Supreme Court ruled that the National Bank Act (NBA) does not preempt states from bringing judicial actions against national banks to enforce non-preempted state anti-discrimination laws, and by implication state consumer protection laws, as long as the state authorities do not encroach on the visitorial powers of the national bank regulator, the Office of Comptroller of the Currency (OCC). The Court ruled that administrative subpoenas or other forms of administrative oversight or examination are included in visitorial powers and, thus, are not available as state enforcement tools. The case, Cuomo v. The Clearing House Association, L.L.C.,___ U.S. ___, 129 S.Ct. 2710 (2009), involves a challenge by national banks and OCC to an attempt by the New York State Attorney General (AG) to investigate possible discrimination in real estate lending by certain national banks and their subsidiaries. In response to a request that these banks provide non-public information about their real estate policies and loans in New York, a banking association to which these banks belong, The Clearing House Association, L.L.C., and OCC obtained trial and appellate court orders enjoining the state investigation and enforcement efforts.
The Supreme Court decision invalidated an OCC regulation, 12 C.F.R. § 7.4000, to the extent that it preempted state officials from “prosecuting enforcement actions” against national banks. That regulation reflected OCC’s interpretation of 12 U.S.C. § 484, a provision of the NBA which proclaims that “no national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice, or such as shall be, or have been exercised or directed by Congress.” The Court’s opinion analyzed the OCC regulation on the basis of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). It recognized that the term “visitorial powers” is ambiguous and that judicial deference should be accorded to a reasonable interpretation of the term by the agency charged with interpreting it, OCC. The Court, however, found that OCC’s interpretation did not meet the reasonableness standard. The Court’s opinion concluded that OCC had no reasonable basis for equating visitorial power delegated to OCC by the NBA and a state’s sovereign power to enforce its own non-preempted state laws with respect to national banks. Dissenting on this point, Justice Thomas, joined by Chief Justice Roberts and Justices Kennedy and Alito, would have upheld the OCC regulation and the breadth of OCC’s interpretation of visitorial power as a reasonable interpretation of an ambiguous statute and, therefore, falling within Chevron and worthy of judicial deference.
Subtitle D of Title X, the Consumer Financial Protection Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), P.L. 111-203, contains a provision designed to codify the ruling of the Supreme Court in Cuomo that federal visitorial clause provisions do not prohibit state enforcement actions. There is also a provision authorizing state attorneys general and state regulators to bring actions against national banks and federal savings associations for violations of Title X and any implementing regulations. The legislation also defines a standard and some procedural requirements for OCC to follow in preempting the applicability of state consumer protection laws to national banks or federal savings associations. These provisions in Dodd-Frank follow other efforts in the 111th Congress to deal with the issue of federal preemption of state efforts to enforce financial consumer protection laws.
The 112th Congress may be presented with legislation to amend the Dodd-Frank provisions and/or opportunities to evaluate how the interaction between state and federal consumer protection laws and enforcement efforts is protecting consumers without unduly burdening nationwide banking concerns.
Date of Report: January 11, 2011
Number of Pages: 13
Order Number: R40595
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Legislative Attorney
On June 29, 2009, the U.S. Supreme Court ruled that the National Bank Act (NBA) does not preempt states from bringing judicial actions against national banks to enforce non-preempted state anti-discrimination laws, and by implication state consumer protection laws, as long as the state authorities do not encroach on the visitorial powers of the national bank regulator, the Office of Comptroller of the Currency (OCC). The Court ruled that administrative subpoenas or other forms of administrative oversight or examination are included in visitorial powers and, thus, are not available as state enforcement tools. The case, Cuomo v. The Clearing House Association, L.L.C.,___ U.S. ___, 129 S.Ct. 2710 (2009), involves a challenge by national banks and OCC to an attempt by the New York State Attorney General (AG) to investigate possible discrimination in real estate lending by certain national banks and their subsidiaries. In response to a request that these banks provide non-public information about their real estate policies and loans in New York, a banking association to which these banks belong, The Clearing House Association, L.L.C., and OCC obtained trial and appellate court orders enjoining the state investigation and enforcement efforts.
The Supreme Court decision invalidated an OCC regulation, 12 C.F.R. § 7.4000, to the extent that it preempted state officials from “prosecuting enforcement actions” against national banks. That regulation reflected OCC’s interpretation of 12 U.S.C. § 484, a provision of the NBA which proclaims that “no national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice, or such as shall be, or have been exercised or directed by Congress.” The Court’s opinion analyzed the OCC regulation on the basis of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). It recognized that the term “visitorial powers” is ambiguous and that judicial deference should be accorded to a reasonable interpretation of the term by the agency charged with interpreting it, OCC. The Court, however, found that OCC’s interpretation did not meet the reasonableness standard. The Court’s opinion concluded that OCC had no reasonable basis for equating visitorial power delegated to OCC by the NBA and a state’s sovereign power to enforce its own non-preempted state laws with respect to national banks. Dissenting on this point, Justice Thomas, joined by Chief Justice Roberts and Justices Kennedy and Alito, would have upheld the OCC regulation and the breadth of OCC’s interpretation of visitorial power as a reasonable interpretation of an ambiguous statute and, therefore, falling within Chevron and worthy of judicial deference.
Subtitle D of Title X, the Consumer Financial Protection Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), P.L. 111-203, contains a provision designed to codify the ruling of the Supreme Court in Cuomo that federal visitorial clause provisions do not prohibit state enforcement actions. There is also a provision authorizing state attorneys general and state regulators to bring actions against national banks and federal savings associations for violations of Title X and any implementing regulations. The legislation also defines a standard and some procedural requirements for OCC to follow in preempting the applicability of state consumer protection laws to national banks or federal savings associations. These provisions in Dodd-Frank follow other efforts in the 111th Congress to deal with the issue of federal preemption of state efforts to enforce financial consumer protection laws.
The 112th Congress may be presented with legislation to amend the Dodd-Frank provisions and/or opportunities to evaluate how the interaction between state and federal consumer protection laws and enforcement efforts is protecting consumers without unduly burdening nationwide banking concerns.
Date of Report: January 11, 2011
Number of Pages: 13
Order Number: R40595
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Posts
