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Dreher Tomkies LLP
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Columbus, Ohio 43215
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The Senate voted 60 to 39 to accept the House Conference Report on H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill now goes to the President for his signature.

Title X of the Act is referred to as the Consumer Financial Protection Act of 2010. The Consumer Financial Protection Act of 2010 creates a Bureau of Consumer Financial Protection within the Federal Reserve System which is charged with regulating the offerings and provisions of consumer financial products or services under the federal consumer financial laws. The Bureau is to implement and enforce federal consumer financial law.

Unfair, Deceptive or Abusive Act or Practices

The Bureau is given substantial rulemaking authority including authorization to address unfair, deceptive or abusive acts or practices. The Act provides that an act or practice may be declared unfair if the Bureau has a reasonable basis to conclude that (i) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and (ii) such substantial injury is not outweighed by countervailing benefits to consumers or to competition. An act or practice may be declared abusive if the act or practice:

(1) Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or

(2) Takes unreasonable advantage of-

(a) A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

(b) The inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or

(c) The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

These standards leave much to the Bureau’s discretion and judgment.


Title X of the Act creates a new standard for preemption of state consumer financial laws. The Act provides that state consumer financial laws are preempted, only if:

(1) Application of a state consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that state;

(2) In accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in Barnett Bank of Marion County, 517 U.S. 25 (1996), the state consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order of the Comptroller of the Currency on a case-by-case basis, in accordance with applicable law; or

(3) The state consumer financial law is preempted by a provision of Federal law other than Title X.

  • Case by Case Basis

The Act provides that the term ‘case-by-case basis’ refers to a determination pursuant to the provisions of the Act on preemption made by the Comptroller concerning the impact of a particular state consumer financial law on any national bank that is subject to that law, or the law of any other state with substantively equivalent terms. When making a determination on a case by case basis the Comptroller must first consult with the Bureau and must take the views of the Bureau into account when making the determination.

  • Occupation of The Field

Title X expressly provides that it does not occupy the field in any area of the law.

  • Substantial Evidence

The Act provides that no regulation or order of the Comptroller prescribed under the provision of the Act on preemption is to be interpreted or applied so as to invalidate or otherwise declare inapplicable to a national bank the provision of the state consumer financial law unless substantial evidence made on the record of the proceedings support the specific findings regarding the preemption of such provision in accordance with the legal standard of the decision in Barnett Bank.

  • Subsidiaries and Affiliates

The Act expressly provides that it does not preempt, annul, or affect the applicability of any state law to any subsidiary or affiliate of a national bank (other than a subsidiary or affiliate that is chartered as a national bank).

Title X also addresses visitorial powers, preemption standards for federal savings associates, state attorney general authority and the role of state regulators, federal banking regulators, and the Federal Trade Commission in relation to the new Bureau.

Title X imposes new restrictions on interchange fees. Title XIV imposes restrictions on mortgage lending.

It is clear that there will be increased regulation and regulatory scrutiny on consumer financial transactions in the future. In some areas regulations must be adopted by the Bureau to fully implement the new law, such as in regard to unfair or abusive acts and practices. In other areas, such as the impact of the new preemption standards, there is likely to be increased litigation as the standard in the law is vague.

We will keep you informed of future developments related to Financial Reform.

  • Elizabeth Anstaett and Judy Scheiderer