As has been much publicized, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act), which was signed into law on July 21, 2010, will have a major impact on the way that consumer financial products and services are regulated. Issues related to the preemption of state consumer protection laws as applied to national banks and federal thrift institutions, as well as the authority of states to enforce consumer protection laws generally, are directly addressed by the Act. These provisions were among the most controversial included in the Act. In certain important respects, the Act preserves current federal banking preemption laws and codifies Supreme Court precedents regarding those laws. However, the Act also changes in significant ways the balance between state and federal regulation of consumer financial services, which will have a direct and substantial impact on most federally regulated financial institutions.
As part of its ongoing series, Patton Boggs has prepared a comprehensive Memorandum which reviews federal bank and thrift institution preemption law prior to the Act, explains the changes (and “clarifications”) to the law as set forth in the Act and, of importance to federally regulated financial institutions, identifies areas that such financial institutions will need to address directly in order to deal with some of the changes brought about by the Act.
Perhaps the most significant change to preemption law in the Act is the elimination of the broad extension of preemption that has developed under the National Banking Act and the Home Owners’ Loan Act, the primary two laws governing the activities of national banks and federal thrift institutions, respectively, to operating subsidiaries of national banks and federal thrift institutions.