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Conference of State Bank Supervisors Opposes OCC's Proposed Preemption Rules

On September 26, 2003 the Conference of State Bank Supervisors (CSBS) submitted comments to the OCC regarding the OCCs proposed preemption rules published on August 5, 2003 and requested that the proposal be withdrawn. In the comments the CSBS states that the proposal contains flawed preemption standards that would have far reaching negative effects.

The CSBS states that the broad preemption in the proposed rules concentrating the power in the OCC would change the existing balance of regulatory power over banks. The CSBS states that the proposed rules would undermine the existing dual federal and state system, a result not intended by Congress or supported by case law. The CSBS states that the dual banking system is important in part because of the greater ability of state regulators to respond to local concerns.

The CSBS states that the proposed rules preempting all state laws except those that only incidentally affect the exercise of national bank powers are contrary to existing case law. The CSBS cites to numerous cases and asserts that the courts have never found that states have no authority over national banks. In addition, the CSBS cites congressional support for applying states laws to national banks.

The CSBS objects to the OCC finding authority for exclusive regulatory authority over national banks in statutes that provide permissive authority.

The CSBS expresses concern about the impact on consumers of preempting consumer protection laws and finds no legal basis for such broad preemption.

The CSBS opposes the extension of national bank preemption to national bank operating subsidiaries. The CSBS states that such an interpretation violates the right of states to govern corporations chartered under state law.

The CSBS concludes that the OCC proposal harms consumers and the dual banking system. The CSBS requests that the proposal be withdrawn and the issue reviewed in greater detail.

The strength of the CSBS objection to the proposal may indicate that state regulators will challenge any final rules in court.

Darrell Dreher and Elizabeth Anstaett