Post Dodd-Frank, Preemption Fight Still Favoring Bankers

American Banker (09/28/11) Davidson, Kate
Industry observers say the Office of the Comptroller of the Currency’s (OCC) hand was strengthened last week, when a federal judge in Iowa ruled that the preemption standard was not materially changed by the Dodd-Frank Act – the second such decision this year. In U.S Bank v. Schipper, Judge James E. Gritzler said that the Dodd-Frank Act used the same preemption standard applied in Watters v. Wachovia Bank. His ruling quoted Watters, saying that ‘“state consumer financial laws are preempted, only if… the state consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers.”’ This decision, along with a case earlier this year that came out of an appellate court in Florida, can “give the OCC more ammunition for legal challenges…and also provide banks a better understanding of how the Barnett standard will be applied under the reform law,” Robert Cook, a partner with Hudson Cook LLP, said. However, while the decisions affirming the OCC’s view on preemption are helpful for banks, they will not stop more cases from being pursued by consumer advocates and states. “If you’re industry, you could take some comfort from the decision, but there are a lot more salvos that are going to be fired in the preemption battle than just this case,” Jeffrey Taft, a partner with Mayer Brown LLP, stated. “Until the appellate courts weigh in, it’s hard to draw any conclusions about who has won and who has lost,” he added.