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COURT FINDS THAT NBA PREEMPTION DOES NOT APPLY WHEN NATIONAL BANK IS AN ASSIGNEE

The United States Court of Appeals for the Eighth Circuit held that state law claims relating to loans originated by a state-chartered bank were not completely preempted by the Depository Institutions Deregulation and Monetary Control Act (DIDA), 12 U.S.C. § 1831d, and therefore removal to federal court was not appropriate. Thomas v. US Bank National Association ND, No. 08-3302, 2009 WL 2410577 (8th Circ. August 7, 2009). The claims were made under the Missouri Second Mortgage Loan Act and brought against purchasers of the loans, some of whom were national banks.

As an alternative to the complete preemption argument under DIDA, the national bank assignees argued for complete preemption under the National Bank Act Section 85 and Section 86. The court stated that the national banks did not originate the loans at issue, but purchased the loans, making them assignees. The court found that as assignees, the national banks are subject to all the claims which could have been brought against the originator of the loan, quoting 15 U.S.C. § 1641(d), which provides the “[a]ny person who purchases or is otherwise assigned a [tainted] mortgage . . . shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the [original lender].” The court stated that to hold otherwise would allow an originating lender to cleanse an otherwise illegal loan merely by assigning it to a national bank. The quoted provision of federal law is part of the Truth in Lending Act applicable to high cost mortgages.

This case illustrates the longstanding common law principle that an assignee of a contract is in no better position than was the assignor of the contract. Banks cannot use their federal powers and preemption authority to avoid issues with respect to contracts they purchased but did not initiate.

  • Darrell Dreher and Elizabeth Anstaett