InfoBytes Blog
OCC clarifies Dodd-Frank preemption standards
On December 18, the OCC released a letter clarifying the agency’s interpretation of preemption standards and requirements codified by Dodd-Frank in 12 U.S.C. § 25b. The letter notes that section 25b codifies three standards pursuant to which federal law may preempt state consumer financial law, focusing on the procedural requirements for OCC “preemption determinations,” which are “affirmative conclusion[s] by the OCC that federal law preempts a state consumer financial law” made under the Barnett standard in section 25b. The letter explains that a “preemption determination” is “limited to a regulation or order issued by the OCC that concludes that a state consumer financial law is preempted pursuant to the Barnett standard,” and does not include “[a]n OCC action that has only indirect or incidental effects on a state consumer financial law,” or when the OCC “concludes that (1) a state consumer financial law is preempted pursuant to the discriminatory effect or other federal law standards or (2) a state law other than a state consumer financial law is preempted.” The letter addresses the OCC’s authority to make preemption determinations by regulation or on a “case-by-case basis,” including the circumstances under which CFPB consultation is required, the substantial evidence standard, and the requirement to publish preemption determinations. It clarifies that the section 25b periodic review requirement applies to any OCC conclusion that a state consumer law is preempted, which is not limited to determinations made under the Barnett standard. The interpretive letter also confirms that section 25b does not affect OCC interpretations of the authority to charge interest under 12 U.S.C. § 85, addresses the level of deference the OCC is afforded with respect to its interpretations, and describes the agency’s framework for complying with the standards and requirements for preemption determinations.