Eighth Circuit Holds State Law Claims Regarding Document Preparation Fees is Preempted for Federal Savings Associations

On October 20, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court finding that state laws purporting to restrict lenders from charging document preparation fees are preempted by Office of Thrift Supervision (OTS) regulations issued under the Home Owners’ Loan Act. Casey v. Federal Deposit Ins. Corp., No. 09-1096, 2009 WL 3349950 (8th Cir. Oct. 20, 2009). In Casey, the initial claim was brought by seven homeowners against four lenders that were all federal savings associations (FSAs). The homeowners claimed that the FSAs’ practice of charging fees for the preparation of loan documents violated two Missouri laws–one prohibiting the unlicensed practice of law, and another prohibiting fraudulent conduct in commerce. The FSAs moved for dismissal of the claims based on preemption of the Missouri laws by OTS regulations. Under Section § 560.2(b) of the OTS regulations, among the types of preempted state laws are those purporting to impose requirements regarding “loan-related fees, including, without limitation, initial charges.” The homeowners argued that, because the Missouri state laws ”[made] no mention of lending,” they “necessarily fall[] outside the scope of the § 560.2(b) examples,” and are preempted only if they “purport[] to regulate or otherwise affect” credit activities without regard to § 560.2(b). The court concluded that “a state law that either on its face or as applied imposes requirements regarding the examples listed in § 560.2(b) is preempted. A generally applicable state law that imposes no such requirements will not be preempted if, as applied, it ‘only incidentally affect[s] the lending operations of [FSAs] or [is] otherwise consistent with the purposes of [§ 560.2(a)].” In dismissing the homeowners’ claims, the Eighth Circuit stated that the Missouri laws at issue, as applied, would impose requirements regarding loan-related fees and were thus preempted by § 560.2(b) of the OTS regulations.