Recent Important Developments in Federal Preemption for National and State Banks: What They Mean for Bank and Nonbank Consumer Financial Services Providers

A series of recent important developments are creating challenges for providers of consumer financial services that rely on federal preemption to charge customers uniform interest rates and fees on a nationwide basis. In addition to state legislative efforts to expand the reach of state law, the scope of federal preemption is under challenge in federal and state courts. While federal banking regulators have historically taken an expansive view of federal preemption, the traditional deference that courts have given to such interpretations could be revisited based on the outcome of a case soon to be decided by the U.S. Supreme Court.

Topics will include:

• The U.S. Supreme Court’s grant of certiorari in Cantero v. Bank of America on the question whether the National Bank Act preempts state laws requiring the payment of interest on mortgage escrow accounts and the case’s implications for preemption of other state laws
• The impact of state laws opting out of federal law allowing interest rate exportation by state banks on all types of loans and other extensions of credit
• The impact of state laws defining “true lender” on the ability of non-banks to take advantage of federal interest rate exportation authority through partnerships with national or state banks
• How the California trial court just ruled in Opportunity Financial, LLC v. California Department of Financial Protection and Innovation, the extremely important “true lender” lawsuit pending in California state court, its prospects on appeal, and the potential implications in California and nationally
• The implications of a U.S. Supreme Court override of the Chevron deference framework for OCC and FDIC regulations interpreting federal statutes on interest rate authority of national and state banks
• States’ efforts to apply their licensing laws to out-of-state banks and the impact on these banks and their non-bank lending partners