Post Dodd-Frank, Bankers Continue To Prevail In Preemption Fight

Post Dodd-Frank, Bankers Continue To Prevail In Preemption Fight



State regulators and the Treasury Department insist that the enactment of the Dodd-Frank Act effectively obliges national banks to comply with more state consumer protection measures.

However, courts are not supporting these claims.

Last week, a federal judge in the state of Iowa ruled that the Dodd-Frank law did not materially alter the standard for federal preemption. This was the second such decision following a ruling in May by an appellate court in Florida.

Industry observers say that although the battle may be far from over, court decisions that stemmed from these two cases have strengthened the hand of the Office of the Comptroller of the Currency, which finalized a rule over the objections of the Treasury in July that said preemption in general was unaffected by Dodd-Frank.

Ray Natter, a former deputy chief counsel of the OCC and a partner at Barnett Sivon & Natter, said, “The court clearly said that the preemption standard applied to national banks was not materially changed by Dodd-Frank. I think this decision is entirely consistent with the OCC’s position on the impact of Dodd-Frank.”

A district court judge in U.S. Bank v. Schipper ruled that there is no need for national banks to comply with an Iowa law which imposes limitations on ATM service providers.

While state lawyers have argued that the law must not be preempted since Dodd-Frank raised such standards, this was not enough to convince Judge James E. Gritzner. In the ruling’s footnote, Judge Gritzner said that the same preemption standard was applied in the Watters v. Wachovia Bank case, which itself depended on the so-called Barnett standard established in 1996 by the Supreme Court.