DODD-FRANK PREEMPTION LIMBO: CUTOFF DATE FOR GRANDFATHERED CONTRACTS HAS PASSED
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203 (July 21, 2010) (Dodd-Frank Act) does not affect contracts entered into before July 21, 2010, begging the question as to what state laws may apply to contracts entered into between July 21, 2010 and the as-yet-unknown effective date of the new preemption provisions. That effective date—which may be as early as January 2011 or as late as January 2012—will be published in the Federal Register on or before September 19, 2010.
Section 1043 of the Dodd-Frank Act generally provides that Title X, known as the Consumer Financial Protection Act of 2010 (CFPA), may not be construed to alter or affect the applicability of any regulation, order, guidance or interpretation by the Comptroller of the Currency or the Director of the Office of Thrift Supervision regarding the applicability of state law to any contract entered into on or before the date of enactment (i.e., July 21, 2010), by national banks, federal savings associations or certain subsidiaries thereof. Thus, contracts dated July 20, 2010 or earlier are grandfathered under existing preemption standards.
So what about contracts entered into, e.g., today or 10 days after the date of enactment? They appear to be in preemption limbo. The new preemption provisions will become effective on the date that consumer protection functions are turned over to the new Consumer Financial Protection Bureau, which has yet to be determined. The Secretary of the Treasury must publish notice of the designated transfer date by September 19, 2010.
See our Alert dated July 16, 2010 for general information on Dodd-Frank. We will keep you informed of future developments, including the designation of the transfer date.
In light of this preemption limbo and the new preemption provisions, it may be advisable to reevaluate compliance with state consumer financial laws (particularly disclosure requirements) and implement any changes as quickly as practicable. Do not hesitate to contact us if you would like information about state law requirements that may apply under the new Dodd-Frank Act preemption standards.
- Judy Scheiderer