Office of Thrift Supervision Integration; Dodd-Frank Act Implementation, 43549-43569 [2011-18231]

Agencies

• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 76, Number 140 (Thursday, July 21, 2011)]
[Rules and Regulations]
[Pages 43549-43569]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18231]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 4, 5, 7, 8, 28, and 34

[Docket ID OCC-2011-0018]
RIN 1557-AD41


Office of Thrift Supervision Integration; Dodd-Frank Act 
Implementation

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
adopting amendments to its regulations governing organization and 
functions, availability and release of information, post-employment 
restrictions for senior examiners, and assessment of fees to 
incorporate the transfer of certain functions of the Office of Thrift 
Supervision (OTS) to the OCC pursuant to Title III of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act. The OCC also is 
amending its rules pertaining to preemption and visitorial powers to 
implement various sections of the Act; change in control of credit card 
banks and trust banks to implement section 603 of the Act; and deposit-
taking by uninsured Federal branches to implement section 335 of the 
Act.

DATES: July 21, 2011, except for the amendments to 12 CFR 4.73 in 
amendatory instruction 21, 12 CFR 4.74 in amendatory instruction 23, 12 
CFR 4.75 in amendatory instruction 25, 12 CFR 4.76 in amendatory 
instruction 27, which are effective July 21, 2012; the amendment to 12 
CFR 5.50 in amendatory instruction 31, which is effective July 21, 
2013; and the amendment to 12 CFR 8.6 in amendatory instruction 43, 
which is effective December 31, 2011.

FOR FURTHER INFORMATION CONTACT: Andra Shuster, Senior Counsel, Heidi 
Thomas, Special Counsel, Michele Meyer (preemption), Assistant 
Director, or Stuart Feldstein, Director, Legislative and Regulatory 
Activities Division, (202) 874-5090; Mitchell Plave (assessments), 
Special Assistant to the Deputy Chief Counsels, Office of the Chief 
Counsel, 202-874-5200; Timothy Ward, Deputy Comptroller for Thrift 
Supervision, (202) 874-4468; or Frank Vance, Manager, Disclosure 
Services and Administrative Operations, Communications Division, (202) 
874-5378, Office of the Comptroller of the Currency, 250 E Street, SW., 
Washington, DC 20219.

SUPPLEMENTARY INFORMATION: 

I. Background

    On May 26, 2011, the OCC published in the Federal Register a notice 
of proposed rulemaking (NPRM or proposal) to implement Title III, and 
certain other provisions, of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) 
(Dodd-Frank Act or Act). Title III of the Act transfers the powers, 
authorities, rights and duties of the OTS to other banking agencies, 
including the OCC, on the ``transfer

[[Page 43550]]

date.'' The transfer date is one year after the date of enactment of 
the Dodd-Frank Act, July 21, 2011. The Dodd-Frank Act also abolishes 
the OTS ninety days after the transfer date.
    Specifically, the Dodd-Frank Act transfers to the OCC all functions 
of the OTS and the Director of the OTS relating to Federal savings 
associations. As a result, the OCC will assume responsibility for the 
ongoing examination, supervision, and regulation of Federal savings 
associations.\1\ The Act also transfers to the OCC rulemaking authority 
of the OTS relating to all savings associations, both state and 
Federal.\2\ The legislation continues in effect all OTS orders, 
resolutions, determinations, agreements, regulations, interpretive 
rules, other interpretations, guidelines, procedures and other advisory 
materials in effect the day before the transfer date, and allows the 
OCC to enforce these issuances with respect to Federal savings 
associations, unless the OCC modifies, terminates, or sets aside such 
guidance or until superseded by the OCC, a court, or operation of 
law.\3\ Title III also transfers OTS employees to either the OCC or 
FDIC, allocated as necessary to perform or support the OTS functions 
transferred to the OCC and FDIC, respectively.
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    \1\ Dodd-Frank Act, section 312(b)(2)(B)(i)(I), 124 Stat. at 
1522 (to be codified at 12 U.S.C. 5412). Title III also transfers 
all functions of the OTS relating to state savings associations to 
the Federal Deposit Insurance Corporation (FDIC) and all functions 
relating to the supervision of any savings and loan holding company 
and nondepository institution subsidiaries of such holding 
companies, as well as rulemaking authority for savings and loan 
holding companies, to the Board of Governors of the Federal Reserve 
System (FRB). Dodd-Frank Act, section 312(b)(1) and (2)(A), 124 
Stat. at 1521 (to be codified at 12 U.S.C. 5412) (savings and loan 
holding companies) and (2)(C), 124 Stat. at 1522 (to be codified at 
12 U.S.C. 5412) (state savings associations).
    \2\ Id. at section 312(b)(2)(B)(i)(II), 124 Stat. at 1522 (to be 
codified at 12 U.S.C. 5412).
    \3\ Id. at section 316(b), 124 Stat. at 1525 (to be codified at 
12 U.S.C. 5414).
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II. OCC Regulatory Actions To Integrate OTS Functions

    As described in the preamble for the proposed rule, the OCC is 
undertaking a multi-phased review of its regulations, as well as those 
of the OTS, to determine what changes are needed to facilitate the 
transfer of supervisory jurisdiction for Federal saving associations to 
the OCC. This final rule, described in detail below, is part of the 
first phase of this review and includes provisions revising OCC rules 
that will be central to internal agency functions and operations 
immediately upon the transfer date, such as providing for the OCC's 
assessment of Federal savings associations and adapting the OCC's rules 
governing the availability and release of information to cover 
information pertaining to the supervision of those institutions. This 
final rule also amends OCC regulations necessary to implement certain 
revisions to the banking laws that either took effect on the enactment 
of the Dodd-Frank Act or are effective as of the transfer date.
    As part of this first phase of our review of OTS and OCC 
regulations, the OCC also will issue an interim final rule with a 
request for comments, effective on publication, that republishes those 
OTS regulations the OCC has the authority to promulgate and will 
enforce as of the transfer date, with nomenclature and other technical 
changes.\4\ These republished regulations will supersede the OTS 
regulations in Chapter V for purposes of OCC supervision and regulation 
of Federal savings associations, and for certain rules for purposes of 
the FDIC's supervision of state savings associations. OTS regulations 
that will be unnecessary following the transfer of OTS functions to the 
OCC, or that are superseded as of the transfer date by provisions of 
the Dodd-Frank Act, will be repealed at a later date.
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    \4\ Pursuant to section 316(c)(2) of the Dodd-Frank Act, 124 
Stat. at 1525 (to be codified at 12 U.S.C. 5415), the OCC and the 
FDIC published in the Federal Register on July 6, 2011 a joint 
notice that identified those OTS regulations that each agency will 
enforce as of the transfer date. 76 FR 39246.
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    In future phases of our regulatory review, the OCC will consider 
more comprehensive substantive amendments, as necessary, to these 
regulations. For example, we may propose to repeal or combine 
provisions in cases where OCC and former OTS rules are substantively 
identical or substantially overlap. In addition, we may propose to 
repeal or modify OCC or former OTS rules where differences in 
regulatory approach are not required by statute or warranted by 
features unique to either charter. We expect to publish these 
amendments in one or more notices of proposed rulemaking, the first of 
which we expect to issue later in 2011. This substantive review also 
will provide an opportunity for the OCC to ask for comments suggesting 
revisions to the rules for both national banks and Federal savings 
associations that would remove provisions that are ``outmoded, 
ineffective, insufficient, or excessively burdensome,'' consistent with 
the goals outlined in an executive order recently issued by the 
President.\5\
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    \5\ Executive Order 13563, ``Improving Regulation and Regulatory 
Review,'' 76 FR 3821 (Jan. 21, 2011).
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III. Description of the Proposal and Comments Received

    The NPRM contained amendments to OCC rules at 12 CFR part 4 
pertaining to its organization and functions, the availability of 
information under the Freedom of Information Act (FOIA), the release of 
non-public OCC information, and restrictions on the post-employment 
activities of senior examiners; and at 12 CFR part 8, pertaining to 
assessments. This NPRM also proposed to amend 12 CFR parts 5 and 28, 
pertaining to change in control of credit card banks and trust banks 
and deposit-taking by uninsured Federal branches, respectively, and 12 
CFR parts 5, 7 and 34, pertaining to preemption and visitorial powers, 
pursuant to the Dodd-Frank Act. The public comment period closed on 
June 27, 2011, and the OCC received a total of 45, including comments 
from consumer advocacy groups, government agencies, representatives of 
Congress, associations of state officials, industry trade groups, 
Federal and state banks and thrifts, and law firms. Set forth below is 
a detailed description of these comments and the resulting final rule.

IV. Section-by-Section Description of Final Rule

A. Part 4

    The NPRM contained a number of amendments to part 4 to incorporate 
the supervision of Federal savings associations within the OCC. We 
received no substantive comments on the proposed amendments to part 4 
and therefore adopt them as proposed, with one technical correction to 
Sec.  4.14 to include cites to OCC rules applicable to savings 
associations.
1. Organization and Functions (Part 4, Subpart A)
    Subpart A describes the organization and functions of the OCC and 
provides the OCC's principal addresses. The final rule amends subpart A 
to reflect the organizational and functional changes resulting from the 
transfer of the powers and duties of the OTS to the OCC on the transfer 
date. Other changes conform this subpart to additional provisions in 
the Dodd-Frank Act, including the Comptroller's membership on the 
Financial Stability Oversight Council.
2. Freedom of Information Act (Part 4, Subpart B)
    Subpart B contains the OCC's rules for making requests for agency 
records and documents under the FOIA. The final rule amends subpart B 
to apply these rules to FOIA requests relating to Federal savings 
associations received by the OCC as of the transfer date, ensures

[[Page 43551]]

that records of the OTS are subject to the OCC's FOIA regulations, and 
makes various technical changes to part 4 to correct technical errors 
and to update appropriate references to OCC units charged with handling 
FOIA requests. The final rule also provides that the OTS's former rules 
will continue to govern requests received by the OTS prior to the 
transfer date.
3. Non-Public Information (Part 4, Subpart C)
    Subpart C contains OCC rules and procedures for requesting access 
to various types of nonpublic information and the OCC's process for 
reviewing and responding to such requests. It also clarifies the 
persons and entities with which the OCC can share non-public 
information. The final rule amends subpart C to cover OTS nonpublic 
information transferred to the OCC and, going forward, OCC nonpublic 
information related to Federal savings associations. The final rule 
also provides that nonpublic information in the possession of former 
employees or officials of the OTS will remain subject to 
confidentiality safeguards and procedures for requesting access to such 
information. As with FOIA requests, the final rule provides that the 
OTS's former rules will continue to govern requests for nonpublic 
information received by the OTS prior to the transfer date.
4. One-Year Restrictions on Post-Employment Activities of Senior 
Examiners (Part 4, Subpart E)
    Subpart E sets forth the employment restrictions placed on senior 
examiners for one year after these individuals leave the employment of 
the OCC. During this period, a former senior examiner of a national 
bank is prohibited from accepting compensation from the bank or from an 
entity that controls the bank. The OTS adopted nearly identical rules. 
The final rule amends subpart E to include senior examiners of savings 
associations.

B. Dodd-Frank Act Amendments Affecting Approval of Change in Control 
Notices and Acceptance of Deposits by Federal Branches (Parts 5 and 28)

    This final rule contains amendments to 12 CFR part 5 to implement 
section 603 of the Dodd-Frank Act. Section 603 provides for a three-
year moratorium (with certain exceptions) on the approval of a change 
in control of credit card banks, industrial banks and trust banks, if 
the change in control would result in a commercial firm controlling 
(directly or indirectly) such a bank. The moratorium took effect on the 
date of enactment of the Act, i.e., July 21, 2010. The proposal amended 
12 CFR 5.50(f) to conform OCC regulations to this section of the Act. 
We received no comments on this amendment and adopt it as proposed.
    Section 6 of the International Banking Act, 12 U.S.C. 3104(b), 
provides that uninsured Federal branches of foreign banks may not 
accept deposits in an amount of less than the standard maximum deposit 
insurance amount (SMDIA). The SMDIA is defined in 12 U.S.C. 
1821(a)(1)(E) to mean $100,000, subject to certain adjustments provided 
for in the statute. Section 335 of the Dodd-Frank Act, which takes 
effect on the transfer date, amends 12 U.S.C. 1821(a)(1)(E) to change 
the amount from $100,000 to $250,000. Section 28.16(b) of the OCC's 
regulations states that an uninsured Federal branch may accept initial 
deposits of less than $100,000 only from certain persons. In order to 
conform this section of the OCC's regulations to the statutory changes 
and to prevent the need to continually amend this section for changes 
in the SMDIA, the proposal amended 12 CFR 28.16(b) to refer to 12 
U.S.C. 1821(a)(1)(E), rather than the obsolete reference to $100,000. 
We received no comments on this amendment and adopt it as proposed.

C. Preemption and Visitorial Powers (Parts 5, 7, and 34)

1. Dodd-Frank Act Provisions Affecting Preemption and Visitorial Powers
    The Dodd-Frank Act contains provisions, effective as of the 
transfer date (July 21, 2011), that affect the scope of preemption for 
operating subsidiaries, Federal savings associations, and national 
banks.\6\ The Act also sets forth procedural requirements for future 
preemption determinations \7\ and codifies the Supreme Court's 
visitorial powers decision in Cuomo v. Clearing House Association, 
L.L.C.\8\
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    \6\ Dodd-Frank Act, sections 1044-1046, 124 Stat. at 2014-2017 
(to be codified at 12 U.S.C. 25b, 1465). Section 1044, which amends 
chapter one of title LXII of the Revised Statutes by inserting a new 
section 5136C (to be codified at 12 U.S.C. 25b), contains the 
principal national bank preemption provisions.
    \7\ Id. at section 1044(a), 124 Stat. at 2015-2016 (to be 
codified at 12 U.S.C. 25b).
    \8\ 129 S. Ct. 2710 (June 29, 2009).
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    The Act precludes preemption of state law for national bank 
subsidiaries, agents and affiliates.\9\ The Act also changes the 
preemption standards applicable to Federal savings associations to 
conform to those applicable to national banks. The Act specifically 
provides that, as of the transfer date, determinations by a court or by 
the OCC under the Home Owners' Loan Act (HOLA) with respect to Federal 
savings associations must be made in accordance with the laws and legal 
standards applicable to national banks regarding the application of 
state law.\10\
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    \9\ Dodd-Frank Act, sections 1044(a), 1045, 124 Stat. at 1376, 
2016, 2017 (to be codified at 12 U.S.C. 25b).
    \10\ Id. at section 1046, 124 Stat. at 2017 (to be codified at 
12 U.S.C. 1465).
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    The Act further provides that ``state consumer financial laws'' 
\11\ may be preempted only if: (1) Application of such a law would have 
a ``discriminatory effect'' on national banks compared with state-
chartered banks in that state; (2) ``in accordance with the legal 
standard for preemption in the decision of the Supreme Court in'' 
Barnett Bank of Marion County, N.A. v. Nelson,\12\ the state consumer 
financial law ``prevents or significantly interferes with the exercise 
by the national bank of its powers'' (Barnett standard); or (3) the 
state consumer financial law is preempted by a provision of Federal law 
other than Title LXII of the Revised Statutes.\13\
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    \11\ The Dodd-Frank Act defines the term ``state consumer 
financial law'' to mean a state law that (1) does not directly or 
indirectly discriminate against national banks and that (2) directly 
and specifically (3) regulates the manner, content, or terms and 
conditions of (4) any financial transaction or related account (5) 
with respect to a consumer. Id. at section 1044(a), 124 Stat. at 
2014-2015 (to be codified at 12 U.S.C. 25b). The Dodd-Frank Act does 
not address the application of state law that is not a ``state 
consumer financial law'' to national banks.
    \12\ 517 U.S. 25 (1996).
    \13\ Dodd-Frank Act, section 1044(a), 124 Stat. at 2015 (to be 
codified at 12 U.S.C. 25b).
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    The Dodd-Frank Act imposes new procedures and consultation 
requirements with respect to how the OCC may reach certain future 
preemption determinations and clarifies the criteria for judicial 
review of these determinations. Specifically, the Act requires that the 
OCC make preemption determinations with regard to state consumer 
financial laws under the Barnett standard by regulation or order on a 
``case-by-case basis'' in accordance with applicable law.\14\ The Act 
defines ``case-by-case basis'' as a determination by the Comptroller as 
to 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.\15\ When making a 
determination under this provision that a state consumer financial law 
has substantively equivalent terms as the law the OCC is preempting, 
the OCC

[[Page 43552]]

must first consult with and take into account the views of the Consumer 
Financial Protection Bureau (CFPB).\16\
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    \14\ Id.
    \15\ Id.
    \16\ Id.
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    The Dodd-Frank Act also requires there to be substantial evidence, 
made on the record of the proceeding, to support an OCC order or 
regulation that declares inapplicable a state consumer financial law 
under the Barnett standard.\17\ Finally, the Act requires the OCC to 
conduct a periodic review, subject to notice and comment, every five 
years after issuing a preemption determination relating to a state 
consumer financial law and to publish a list of such preemption 
determinations every quarter.\18\
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    \17\ Id. at section 1044(a), 124 Stat. at 2016 (to be codified 
at 12 U.S.C. 25b).
    \18\ Id.
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    Other features of the Dodd-Frank Act address the authority of state 
attorneys general to enforce applicable Federal and state laws. The 
National Bank Act, at 12 U.S.C. 484, vests in the OCC exclusive 
visitorial powers with respect to national banks, subject to certain 
express exceptions.\19\ On June 29, 2009, the Supreme Court issued its 
opinion in Cuomo. The Court held that when a state attorney general 
files a lawsuit to enforce a state law against a national bank, 
``[s]uch a lawsuit is not an exercise of `visitorial powers' and thus 
the Comptroller erred by extending the definition of `visitorial 
powers' to include `prosecuting enforcement actions' in state courts.'' 
\20\ Conversely, the decision recognized the ``regime of exclusive 
administrative oversight by the Comptroller'' \21\ applicable to 
national banks. Accordingly, under Cuomo, a state attorney general may 
bring an action against a national bank in a court of appropriate 
jurisdiction to enforce non-preempted state laws, but is restricted in 
conducting non-judicial investigations or oversight of a national 
bank.\22\
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    \19\ Section 484 provides that ``[n]o national bank shall be 
subject to any visitorial powers except as authorized by Federal 
law, vested in the courts of justice or such as shall be, or have 
been exercised or directed by Congress or by either House thereof or 
by any committee of Congress or of either House duly authorized.''
    \20\ 129 S. Ct. at 2721.
    \21\ Id. at 2718.
    \22\ The Court stated that:
    The request for information [by the Attorney General] in the 
present case was stated to be ``in lieu of'' other action; implicit 
was the threat that if the request was not voluntarily honored, that 
other action would be taken. All parties have assumed, and we agree, 
that if the threatened action would have been unlawful the request-
cum-threat could be enjoined. Here the threatened action was not the 
bringing of a civil suit, or the obtaining of a judicial search 
warrant based on probable cause, but rather the Attorney General's 
issuance of subpoena on his own authority under New York Executive 
Law, which permits such subpoenas in connection with his 
investigation of ``repeated fraudulent or illegal acts * * * in the 
carrying on, conducting or transaction of business.'' See N.Y. Exec. 
Law Ann. Sec.  63(12) (West 2002). That is not the exercise of the 
power of law enforcement ``vested in the courts of justice'' which 
12 U.S.C. 484(a) exempts from the ban on exercise of supervisory 
power.
    Accordingly, the injunction below is affirmed as applied to the 
threatened issuance of executive subpoenas by the Attorney General 
for the State of New York, but vacated insofar as it prohibits the 
Attorney General from bringing judicial enforcement actions.
    Cuomo, 129 S. Ct. at 2721-2722 (emphasis added).
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    The Dodd-Frank Act codifies the Supreme Court's decision in Cuomo 
regarding enforcement of state law against national banks by providing 
that no provision ``of this title'' \23\ or other limits restricting 
the visitorial powers to which a national bank is subject shall be 
construed to limit or restrict the authority of any state attorney 
general to ``bring an action against a national bank in a court of 
appropriate jurisdiction to enforce an applicable law and to seek 
relief as authorized by such law.'' \24\
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    \23\ Dodd-Frank Act, section 1047(a), 124 Stat. at 2018 (to be 
codified at 12 U.S.C. 25b) (referring to Title LXII of the Revised 
Statutes).
    \24\ Id.
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    In addition, the Act provides that these visitorial powers 
provisions shall apply to Federal savings associations and their 
subsidiaries to the same extent and in the same manner as if they were 
national banks or national bank subsidiaries.\25\
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    \25\ Id. at section 1047(b), 124 Stat. at 2018 (to be codified 
at 12 U.S.C. 1465).
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2. Description of the Proposal
    The proposal amended provisions of the OCC's regulations relating 
to preemption (12 CFR 7.4007, 7.4008, 7.4009, and 34.4) (2004 
preemption rules), operating subsidiaries (12 CFR 5.34 and 7.4006), and 
visitorial powers (12 CFR 7.4000) to implement the provisions of the 
Dodd-Frank Act that affect the scope of national bank and Federal 
thrift preemption and codify Cuomo.
    First, we proposed rescission of 12 CFR 7.4006, which is the OCC's 
regulation concerning the application of state laws to national bank 
operating subsidiaries. The proposal also made conforming revisions to 
the OCC's operating subsidiary rules at 12 CFR 5.34(a) and paragraph 
(e)(3) to refer to new 12 U.S.C. 25b, which includes the codification 
of the Dodd-Frank Act preclusion of operating subsidiary 
preemption.\26\
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    \26\ Id. at section 1045, 124 Stat. at 2017 (to be codified at 
12 U.S.C. 25b) provides that Title LXII of the Revised Statutes and 
section 24 of the Federal Reserve Act (12 U.S.C. 371) do not 
preempt, annul, or affect the applicability of state law to any 
subsidiary, affiliate, or agent of a national bank (other than a 
subsidiary, affiliate, or agent that is chartered as a national 
bank).
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    To implement the Act's changes to the preemption standards under 
the HOLA to conform to those applicable to national banks, we proposed 
adding new Sec. Sec.  7.4010(a) and 34.6 to our regulations. The new 
sections provide that state laws apply to Federal savings associations 
and their subsidiaries to the same extent and in the same manner as 
those laws apply to national banks and their subsidiaries, 
respectively. The proposal also added Sec.  7.4010(b) to similarly 
subject Federal savings associations and their subsidiaries to the same 
visitorial powers provisions in the Dodd-Frank Act that apply to 
national banks and their subsidiaries.
    In addition, the proposal made conforming changes to the 2004 
preemption rules at 12 CFR 7.4007 (concerning deposit-taking), 7.4008 
(non-real estate lending), and 34.4 (real estate lending) to reflect 
the Act's provisions concerning preemption of state consumer financial 
laws. Those rules had provided that ``state laws that obstruct, impair, 
or condition a national bank's ability to fully exercise its Federally 
authorized * * * powers are not applicable to national banks.'' The 
proposal noted that, while the phrase ``obstruct, impair or condition'' 
had been drawn from and was intended to be consistent with the 
standards cited by the Supreme Court in Barnett, the terminology had 
resulted in misunderstanding and confusion. Accordingly, the proposal 
removed that phrase from these preemption rules. The proposal further 
clarified that a state law is not preempted to the extent that result 
is consistent with the Barnett decision. The proposal also deleted 
Sec.  7.4009, which had provided only that ``state laws that obstruct, 
impair, or condition a national bank's ability to fully exercise its 
powers to conduct activities under Federal law do not apply to national 
banks'' without identifying any types of state laws that would be 
preempted.
    Finally, the proposal made several changes to the OCC's visitorial 
powers regulation, 12 CFR 7.4000, to conform the regulations to the 
Supreme Court's decision in the Cuomo case as adopted by the Dodd-Frank 
Act. First, it added a reference to 12 U.S.C. 484 in the general rule, 
set forth Sec.  7.4000(a)(1), that only the OCC may exercise visitorial 
powers with respect to national banks subject to certain exceptions. 
Second, to incorporate the Cuomo Court's recognition that nonjudicial 
investigations of national banks

[[Page 43553]]

generally constitute an exercise of visitorial powers, the proposal 
revised the definition of ``visitorial powers'' in Sec.  
7.4000(a)(2)(iv) to clarify that those powers include ``investigating 
or enforcing compliance with any applicable Federal or state laws 
concerning those activities.'' Third, the proposal added a new 
paragraph (b) to provide that ``[i]n accordance with the decision of 
the Supreme Court in Cuomo v. Clearing House Assn., L.L.C., 129 S. Ct. 
2710 (2009), an action against a national bank in a court of 
appropriate jurisdiction brought by a state attorney general (or other 
chief law enforcement officer) to enforce a non-preempted state law 
against a national bank and to seek relief as authorized thereunder is 
not an exercise of visitorial powers under 12 U.S.C. 484.''
3. Comments on the Proposal
    Commenters who disagreed with the preemption provisions of the 
proposal generally relied on several principal arguments:
    [cir] First, that the Barnett standard preemption provision is a 
new statutory ``prevent or significantly interfere'' standard that the 
proposal impermissibly seeks to broaden. These commenters referred to 
portions of the language of the statute and legislative history in 
support of their assertion that the Dodd-Frank Act adopts a new 
preemption standard, narrower than the Barnett decision's ``conflict'' 
preemption analysis.
    [cir] Second, that the ``obstruct, impair, or condition'' language 
introduced in the 2004 preemption rules, which the OCC proposed to 
delete, is inconsistent with Barnett and with the ``prevent or 
significantly interfere'' preemption standard. Many of these commenters 
asserted that the preemption rules adopted by the OCC in 2004 were 
impliedly repealed by the Dodd-Frank Act. Therefore, these commenters 
disagree with the OCC's conclusion that any portions of the 2004 
preemption rules and precedents based on those rules remain applicable.
    [cir] Third, by retaining, rather than repealing, rules that 
preempt categories of state laws, that the proposal would circumvent 
the Dodd-Frank Act procedural and consultation requirements. These 
commenters asserted that the preemption of categories and/or terms of 
state laws is equivalent to ``occupation of the field,'' rather than 
conflict, preemption. These commenters also believe that the Dodd-Frank 
Act procedural requirements apply to, and therefore (retroactively) 
invalidate, certain precedents, including the 2004 preemption rules, 
adopted prior to the Dodd-Frank Act.
    In addition, some of these commenters objected to preemption of 
state and local laws on grounds that preemption is bad public policy 
and asserted that preemption had resulted in predatory lending to 
vulnerable consumers and the financial and subprime mortgage lending 
crises. A few commenters also asserted that the Dodd-Frank Act limits 
the OCC's preemption authority to state consumer financial laws only.
    Some of these commenters further asserted that the proposed 
visitorial powers amendments:
    [cir] Could be construed as prohibiting all types of investigative 
activities by state officials, including collecting complaints from 
consumers or researching public records.
    [cir] Do not reflect the authority of state attorneys general to 
enforce compliance with certain Federal laws and regulations to be 
issued by the CFPB.\27\
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    \27\ Id. at section 1042(a)(2)(B), 124 Stat. at 2013 (to be 
codified at 12 U.S.C. 5552) (pertaining to the ability of state 
attorneys general to enforce certain new regulations promulgated by 
the CFPB).
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    [cir] Incorrectly narrow the definition of visitorial powers to the 
investigation and enforcement of ``non-preempted,'' rather than 
``applicable'' law.
    Commenters who supported the preemption and visitorial powers 
portions of the proposal expressed agreement with the analysis of the 
Dodd-Frank Act preemption provisions and legislative history set out in 
the preamble to the proposal. In the view of these commenters, the 
Barnett standard preemption provision adopts the conflict preemption 
standard that is the fundamental legal standard of the Barnett 
decision. Some commenters agreed that the ``obstruct, impair, or 
condition'' phrasing used in the 2004 preemption rules was a 
distillation of this conflict preemption standard. These commenters 
agreed with the position stated in the preamble to the proposal that 
eliminating this language does not impact the continued applicability 
of precedents based on those rules.
    In addition, supporting commenters argued that a contrary position 
would also have negative consequences for national banks because it 
would eliminate legal certainty concerning which laws apply to their 
operations. These commenters asserted that consumer loans and deposit 
products are subject to comprehensive regulation, and preemption has 
served to provide clarity and certainty as to which regulatory 
requirements and standards apply to national banks. These commenters 
opined that preemption of multiple, differing, and sometimes 
conflicting, state and local laws and regulations is crucial to the 
ability of banks and thrifts to conduct multi-state operations in a 
safe and sound manner to the benefit of consumers, small businesses, 
and the United States economy as a whole. They voiced concern that the 
imposition of an overlay of potentially 50 state and an indeterminate 
number of local government rules on top of myriad Federal requirements 
would have a costly consequence that could materially affect banks and 
their ability to serve consumers efficiently and effectively across the 
nation and could deter future product innovation and modernized, more 
effective consumer disclosures.\28\ These commenters cited studies 
showing that compliance with a multiplicity of state laws can increase 
costs for consumers and loan losses for banks and decrease credit 
availability. Some commenters also noted that uniform national laws, 
and the court and regulatory determinations pursuant to them, have been 
used in the past as a device to open markets, redress local 
protectionist measures, reduce the price of credit, increase the 
availability of credit, and increase the efficiency of banks.
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    \28\ One commenter noted that a bank operating across state 
lines could find itself subject to the law of the state where it 
provides the product or service, the law of the state where its 
branch is located, or the law of the state where the customer is 
located. The bank could also be subject to laws at the county, 
municipal, or other level in any or all of these states. The laws of 
these locations could be different, and failure to comply with each 
state and local law could subject the bank to fines, penalties, and 
litigation, and as result cause it to discontinue activities in 
certain states to the potential detriment of its customers.
---------------------------------------------------------------------------

    Bank and thrift commenters described the scope of their operations 
and provided examples of the burdens the application of state and local 
laws and regulations would impose. According to these institutions, the 
burdens of having to comply with multiple state and local laws would 
impair their efficiency in offering core banking products, such as 
checking accounts, credit cards, mortgage loans, and deposit products. 
Some commenters also voiced concern that their ability to prudently 
underwrite loans, offer borrowers needed flexibility, and provide 
effective consumer disclosures would be compromised by application of 
various state laws.
    Finally, commenters also disputed the contention that preemption 
encouraged lenders to engage in predatory lending practices that 
contributed to the subprime mortgage crisis. Some

[[Page 43554]]

commenters also suggested that the final rule include additional 
provisions to: clarify that the OCC's regulations concerning non-
interest fees and charges (12 CFR 7.4002), adjustable rate mortgages 
(12 CFR 34.21) and debt cancellation contracts (12 CFR 37.1) remain in 
effect; revise, rather than eliminate, 12 CFR 7.4009 to conform with 
Sec. Sec.  7.4007, 7.4008, and 34.4; clarify that the abrogation of 12 
CFR 7.4006 will not be given retroactive effect,\29\ confirm that the 
2004 preemption rules will also apply to Federal savings associations, 
to the same extent that those rules apply to national banks; and 
confirm that all prior OTS preemption actions that are consistent with 
the holding in Barnett, including those based on the HOLA, also 
continue to be effective.
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    \29\ One commenter also requested clarification that the Dodd-
Frank elimination of agent preemption does not apply to employees of 
national banks and Federal thrifts. Employees of national banks and 
Federal thrifts acting within the scope of their employment are not 
acting as agents of these institutions. Therefore, the elimination 
of preemption for agents has no affect on these employees.
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4. Discussion
    The OCC has carefully considered all of the points raised by all of 
the commenters. As described in detail in the next section and for the 
reasons next discussed, the OCC is issuing a final rule that is 
substantially the same as the proposal with additional instructive 
commentary and certain modifications to the visitorial powers 
provisions to address specific concerns that commenters raised and a 
clarifying change to Sec. Sec.  7.4010(a) and 34.6 regarding the 
applicability of state law to Federal savings associations.
a. The Role of Preemption in the U.S. Banking System
    As noted above, in addition to comments on specific aspects of the 
proposed rule, some commenters urged general disfavor of the concept of 
Federal preemption as applied to the powers of national banks, and some 
also contended that preemption in the context of national banks 
contributed to predatory lending practices, which, in turn contributed 
to the recent financial crisis. Both of these concerns are important to 
address as threshold matters.
    When Congress established the fundamental structure of the U.S. 
banking system in 1863, it created national banks and a national 
banking system to operate in parallel with the existing state banking 
system--a ``dual banking system.'' Congress did not abolish state 
banking, but it did include explicit protections in the new framework 
so that national banks would be governed by Federal standards 
administered by a new Federal agency--the Office of the Comptroller of 
the Currency--and not by state authority.
    Perhaps not surprisingly, the independence of national banks from 
state authority over their banking business has produced tensions and 
disputes over the years. Yet, a long series of Supreme Court decisions 
beginning in the earliest years of the national banking system have 
confirmed the fundamental principle of Federal preemption as applied to 
national banks: that the Federally-granted banking powers of national 
banks are governed by national standards set at the Federal level, 
subject to supervision and oversight by the OCC. These characteristics 
are fundamental to the duality of the ``dual banking system.'' Thus 
established, the twin pillars of the national and state banking systems 
have been fundamental to the structure--and success--of the U.S. 
banking system for nearly 150 years. The Supreme Court's Barnett 
decision was a particularly thorough treatment of this background, 
applying a conflict preemption standard consistent with over a century 
of Supreme Court precedent as the yardstick for determining when state 
law applied to a national bank.
    With this design, the state and national banking systems have grown 
up around each other in this ``dual banking system.'' Encompassing both 
large institutions that market products and services regionally, 
nationally and globally, and smaller institutions that focus their 
business on their immediate communities, this dual system is diverse, 
with complex linkages and interdependencies. In this context, and over 
time, a benefit has been that the ``national'' part of the dual banking 
system, the part that has allowed large and small banks to operate 
under uniform national rules across state lines, has helped to foster 
the growth of national products and services and multi-state markets. 
And the system also has supported the contributions of the state 
systems, allowing states to serve as a ``laboratory'' for new 
approaches applicable to their state-supervised institutions.
    Throughout our history, uniform national standards have proved to 
be a powerful engine for prosperity and growth. National standards for 
national banks have been very much a part of this history, benefiting 
individuals, business and the national economy. In the 21st Century, 
the Internet and the advent of technological innovations in the 
creation and delivery of financial products and services has 
accentuated the geographic seamlessness of financial services markets, 
highlighting the importance of uniform standards that attach based on 
the product or service being provided, applying wherever and however 
the product or service is provided. However, the premise that 
Federally-chartered institutions would be subject to standards set at 
the Federal, rather than state-by-state level, does not and should 
never mean that those institutions are subject to lax standards. 
National banks are subject to extensive regulation at the Federal 
level--which is being considerably enhanced by many provisions of the 
Dodd-Frank Act--and to regular, and in some cases, continuous 
examination of their operations.
    Because of the degree of regulation and supervision to which 
national banks are subject, national banks--and other Federally-
regulated depository institutions--had limited involvement in subprime 
lending and the worst subprime loans were originated by nonbank lenders 
and brokers \30\ where national bank preemption was not applicable. 
National bank preemption did not and does not prevent regulation of 
nonbank mortgage lenders and brokers, and going forward, the CFPB's 
authority in this area will bring a new level of Federal standards, 
oversight and enforcement over this ``shadow banking system.'' Concerns 
that have been expressed that Federal consumer protection rules were 
not sufficiently

[[Page 43555]]

robust should be addressed by the CFPB's authority and mandate to write 
strong Federal consumer protection standards, and its research-based 
and consumer-tested rulemaking processes envisioned under the Dodd-
Frank Act.
---------------------------------------------------------------------------

    \30\ See Testimony of Comptroller of the Currency John C. Dugan 
to the Financial Crisis Inquiry Commission, App. B (April 8, 2010); 
Department of the Treasury, Financial Regulatory Reform, A New 
Foundation: Rebuilding Financial Supervision and Regulation (Jun. 
17, 2009), at 69-70 (``worst abuses were made by firms not covered 
by the CRA,'' which applies only to insured depository 
institutions); Mason, Joseph R., Kulick, Robert B. and Singer, Hal 
J., The Economic Impact of Eliminating Preemption of State Consumer 
Protection Laws, 12 U. PA. J. Bus. L. 781 at 782 (2010) (the 
``overwhelming majority of subprime mortgage loans were originated 
by companies that were not subject to preemption * * *''); Committee 
on Financial Services, H.R. Rep. No 111-94, Mortgage Reform and 
Anti-Predatory Lending Act (May 4, 2009) (``Subprime lenders 
included banks, bank affiliates, and non-bank mortgage companies. 
According to Mortgage Bankers Association (MBA), more than half of 
subprime mortgages were made by mortgage brokers and lenders with no 
Federal supervision; a quarter were made by finance companies that 
are affiliates of bank holding companies and indirectly regulated by 
the Federal Reserve Board; and the rest were made by institutions 
directly regulated by Federal financial regulators such as banks, 
thrifts, and credit unions.''); Barney Frank, Chairman of the House 
Financial Services Committee, Lessons of the Subprime Crisis, Boston 
Globe, September 14, 2007, at 11A (``Reasonable regulation of 
mortgages by the bank and credit union regulators allowed the market 
to function in an efficient and constructive way, while mortgages 
made and sold in the unregulated sector led to the crisis.'').
---------------------------------------------------------------------------

b. The Barnett Standard Preemption Provision
    With respect to the specifics of the proposal, the OCC concludes 
that the Dodd-Frank Act does not create a new, stand-alone ``prevents 
or significantly interferes'' preemption standard, but rather, 
incorporates the conflict preemption legal standard and the reasoning 
that supports it in the Supreme Court's Barnett decision. This result 
follows from the language of the statute; is supported by language of 
other, integrally-related portions of the Dodd-Frank Act preemption 
provisions; was so described by its sponsors at the time of enactment 
as intending that result; is consistent with the interpretation Federal 
courts have accorded virtually identical preemption language in the 
Gramm-Leach-Bliley Act of 1999 (GLBA); and subsequently has been 
explained as embodying the intent of the sponsors of the language.
    As described in the preamble to the proposal, the language of the 
Barnett standard preemption provision differs substantially from 
earlier versions of the legislation. Its sponsors have explained that 
this change was intended to provide consistency and legal certainty by 
preserving the preemption principles of the Supreme Court's Barnett 
decision, while specifying a process for preemption determinations, and 
integrating that process with other reforms implemented by the Dodd-
Frank Act, prospectively. For example, when asked by Senator Carper to 
confirm that Section 1044 retained the Barnett standard for determining 
preemption of state consumer financial law passed by the Senate, 
Chairman Dodd confirmed that was so.\31\
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    \31\ As passed by the Senate on May 20, 2010, the legislation 
incorporated the ``Carper Amendment,'' which provided that a state 
consumer financial law could be ``preempted in accordance with the 
legal standards of the decision of the Supreme Court of the United 
States in Barnett Bank v. Nelson (517 U.S. 25 (1996)).'' 156 Cong. 
Rec. S3866 (daily ed. May 18, 2010). The final version of Section 
1044 enacted by Congress reflects the revision to the Carper 
Amendment made by the Conference Committee. When discussing that 
revision, Senator Carper and Senator Dodd had the following 
exchange:
    Senator Carper: Mr. President, I am very pleased to see that the 
conference committee * * * retained my amendment regarding the 
preemption standard for State consumer financial laws with only 
minor modifications. I very much appreciate the effort of Chairman 
Dodd in fighting to retain the amendment in conference.
    Senator Dodd: I thank the Senator. As the Senator knows, his 
amendment received strong bipartisan support on the Senate floor and 
passed by a vote of 80 to 18. It was therefore a Senate priority to 
retain his provision in our negotiations with the House of 
Representatives.
    Senator Carper: One change made by the conference committee was 
to restate the preemption standard in a slightly different way, but 
my reading of the language indicates that the conference report 
still maintains the Barnett standard for determining when a State 
law is preempted.
    Senator Dodd: The Senator is correct. That is why the conference 
report specifically cites the Barnett Bank of Marion County, N.A. v. 
Nelson, Florida Insurance Commissioner, 517 U.S. 25 (1996) case. 
There should be no doubt the legislation codifies the preemption 
standard stated by the U.S. Supreme Court in that case.
    Senator Carper: I again thank the Senator. This will provide 
certainty to everyone--those who offer consumers financial products 
and to consumer[s] themselves.
    156 Cong. Rec. S5902 (daily ed. July 15, 2010) (colloquy between 
Senator Carper and Chairman Dodd).
    See also 156 Cong. Rec. S5889 (daily ed. July 15, 2010) 
(statement by Senator Tim Johnson). And see letter from Senator 
Thomas R. Carper and Senator Mark Warner to Acting Comptroller John 
Walsh (April 4, 2011); OCC Interpretive Letter 1132 (letter from 
Acting Comptroller Walsh to Senators Warner and Carper) (May 12, 
2011) (responding to Senators Carper and Warner and providing 
further detail on the OCC's analysis of the Dodd-Frank Act 
preemption provisions), available at https://www.occ.gov/static/interpretations-and-precedents/may11/int1132.pdf; Letter from 
Senator Thomas R. Carper and Senator Mark Warner to Treasury 
Secretary Timothy Geithner (July 8, 2011).
---------------------------------------------------------------------------

    Some commenters assert, however, that the Barnett standard 
provision and the colloquy between Senators Carper and Dodd point to an 
intention to adopt a new ``prevent or significantly interfere'' 
preemption test for state consumer financial law. However, this 
assertion fails to take account of both the context and entirety of the 
colloquy and is not sustained by the language of the statute, or by the 
Barnett decision itself. Section 1044 of the Dodd-Frank Act provides in 
pertinent part that a state consumer financial law as applied to a 
national bank will be preempted only if, ``in accordance with the legal 
standard for preemption in the decision of the Supreme Court of the 
United States in [Barnett], the State consumer financial law prevents 
or significantly interferes with the exercise by the national bank of 
its powers * * * '' \32\ The ``legal standard for preemption'' employed 
in the Court's decision is conflict preemption, applied in the context 
of powers granted national banks under Federal law.\33\ ``Prevent or 
significantly interfere'' is not ``the legal standard for preemption in 
the decision''; it is part of the Court's discussion of its reasoning; 
an observation made describing other Supreme Court precedent that is 
cited in the Court's decision.\34\
---------------------------------------------------------------------------

    \32\ Dodd-Frank Act, section 1044(a), 124 Stat. at 2015 (to be 
codified at 12 U.S.C. 25b).
    \33\ The Barnett decision describes in detail the analysis under 
the Barnett conflict preemption standard. 517 U.S. at 32-35.
    \34\ 517 U.S. at 33-34.
---------------------------------------------------------------------------

    Therefore, in order to apply the Barnett standard preemption 
provision in section 1044, the first step is that the preemption 
analysis must be ``in accordance with the legal standard for preemption 
in the decision of the Supreme Court'' in Barnett. Thus, the analysis 
should be a conflict preemption legal standard, and the analysis should 
be in accordance with the Court's reasoning applying that standard in 
the Barnett decision. The ``prevent or significantly interfere'' phrase 
that follows then provides a touchstone to that conflict preemption 
standard and analysis.\35\ The phrase cannot be a new, stand-alone 
standard, divorced from the reasoning of the decision without ignoring 
the language that precedes it, which directs that the legal standard be 
the standard for preemption ``in the decision'' of the Court. That 
standard is conflict preemption, as supported by the reasoning of the 
decision, which includes, but is not bounded by, the ``prevent or 
significantly interfere'' formulation. If Congress had intended a 
different preemption analysis than the conflict preemption analysis in 
Barnett, it would have been rejecting not just Barnett, but also, as 
described above, well over a century of judicial precedent upon which 
the decision was founded. We decline to infer that result from 
legislative language that begins by stating that preemption would be 
determined ``in accordance with the legal standard for preemption in 
the decision of the Supreme Court'' in Barnett.
---------------------------------------------------------------------------

    \35\ We note that a recent decision by the U.S. Court of Appeals 
for the 11th Circuit reached the same result. Baptista v. JPMorgan 
Chase Bank, N.A., 640 F.3d 1194, 1197 (11th Cir. May 11, 2011) 
(``Thus it is clear that under the Dodd-Frank Act, the proper 
preemption test asks whether there is a significant conflict between 
the state and federal statutes--that is, the test for conflict 
preemption.'').
---------------------------------------------------------------------------

    This result is supported by other portions of the Dodd-Frank Act 
and relevant precedent.\36\ Specifically, in the same section 1044, the 
related requirement that the OCC must have ``substantial evidence'' on 
the record to support adoption of preemption rules or orders refers to 
``the legal standard of the decision of the Supreme Court in'' the 
Barnett decision, not to any single phrase used in that decision.\37\ 
It would

[[Page 43556]]

not make sense for this ``substantial evidence'' requirement to require 
compliance with a different preemption standard than the standard 
intended by the Barnett standard preemption provision.
---------------------------------------------------------------------------

    \36\ See, e.g., Dodd-Frank Act, section 1046(a), 124 Stat. at 
2017 (to be codified at 12 U.S.C. 1465).
    \37\ See id. at section 1044(a), 124 Stat. at 2016 (to be 
codified at 12 U.S.C. 25b) (providing that regulations and orders 
promulgated under Barnett standard preemption do not affect the 
application of a state consumer financial law to a national bank 
unless substantial evidence made on the record of the proceeding 
supports the specific finding of preemption ``in accordance with the 
legal standard of the decision of the Supreme Court of the United 
States in Barnett Bank of Marion County, N.A. v. Nelson, Florida, 
Florida Insurance Commissioner, et al., 517 U.S. 25 (1996).'').
---------------------------------------------------------------------------

    Other textual support is found in the Dodd-Frank Act section 
providing that Federal savings associations are to be subject to the 
same preemption standards applicable to national banks. Subsection (a) 
of section 1046 states that preemption determinations for Federal 
savings associations under the Home Owners' Loan Act ``shall be made in 
accordance with the laws and legal standards applicable to national 
banks regarding preemption of state law.'' The heading of subsection 
(b), which immediately follows, is ``Principles of Conflict Preemption 
Applicable,'' which can only refer to the national bank preemption 
standards to which Federal savings associations are made subject by 
subsection (a).
    The Barnett standard preemption provision also uses language 
virtually identical to that used in section 104(d)(2)(A) of the 
GLBA.\38\ The leading case applying that standard similarly treated the 
phrase ``prevents or significantly interferes'' as a reference to the 
whole of the Court's Barnett preemption analysis and referred to the 
GLBA statutory language as ``the traditional Barnett Bank standards.'' 
\39\
---------------------------------------------------------------------------

    \38\ See 15 U.S.C. 6701(d)(2)(A).
    \39\ Association of Banks in Insurance Inc. v. Duryee, 270 F.3d 
397, at 405, 408 (6th Cir. 2001).
---------------------------------------------------------------------------

    Accordingly, because we conclude that the Dodd-Frank Act preserves 
the Barnett conflict preemption standard, precedents consistent with 
that analysis--which may include regulations adopted consistent with 
such a conflict preemption justification--are also preserved.\40\ 
Further, as of July 21, 2011, those rules and precedents will apply to 
Federal savings associations to the same extent that they apply to 
national banks.
---------------------------------------------------------------------------

    \40\ One commenter asserted that the Dodd-Frank Act expressly 
preserves only the OCC's rules concerning the law applicable to 
interest rates charged by national banks, and those applicable to 
prior contracts. This does not mean, however, that the 2004 
preemption rules and precedents in other areas have become invalid. 
It is well settled that ``repeals by implication are not favored and 
will not be found unless an intent to repeal is `clear and 
manifest.' '' Rodriguez v. U.S., 480 U.S. 522, 524 (1987) (internal 
citations omitted). Rather, regulatory provisions and other 
precedents that are consistent with standards in the Dodd-Frank Act 
are preserved.
---------------------------------------------------------------------------

c. Deletion of ``Obstruct, Impair, or Condition'' Preemption 
Formulation and Retention of the 2004 Preemption Rules
    Some commenters asserted that the ``obstruct, impair, or 
condition'' phrasing in the 2004 preemption rules was not only 
inconsistent with Barnett but also inconsistent with the new, narrower 
``prevents or significantly interferes'' standard that they assert is 
imposed by the Dodd-Frank Act. As discussed above, we conclude that the 
Dodd-Frank Act Barnett standard is the conflict preemption standard 
employed in the Court's decision, not a new test. The question remains, 
however, of the relationship between that standard and the ``obstruct, 
impair or condition'' formulation. As we noted in the preamble to the 
proposal, the words ``obstruct, impair or condition'' as used in the 
2004 preemption rules were intended to reflect the precedents cited in 
Barnett, not to create a new preemption standard. Nevertheless, we 
acknowledge that the phrase created confusion and misunderstanding well 
before enactment of the Dodd-Frank Act. We also recognize that 
inclusion of the ``prevents or significantly interferes'' conflict 
preemption formulation in the Barnett standard preemption provision may 
have been intended to change the OCC's approach by shifting the basis 
of preemption back to the decision itself, rather than placing reliance 
on the OCC's effort to distill the Barnett principles in this 
manner.\41\
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    \41\ As we noted in note 31, the colloquy between Senators 
Carper and Dodd clearly demonstrates that Congress did not intend to 
change the Barnett standard. But the final language in section 1044 
could be read as a rejection of the ``obstruct, impair, or 
condition'' formulation used in the 2004 preemption rules.
---------------------------------------------------------------------------

    For these reasons, the OCC is deleting the phrase in the final 
rule.\42\ Eliminating this language from our regulations will remove 
any ambiguity that the conflict preemption principles of the Supreme 
Court's Barnett decision are the governing standard for national bank 
preemption. In response to concerns raised by commenters about Dodd-
Frank Act legislative intent, misunderstanding and potential 
misapplication of the ``obstructs, impairs or conditions'' formulation, 
and the relevant legislative history, the OCC also has reconsidered its 
position concerning precedent that relied on that standard. To the 
extent that an existing preemption precedent is exclusively reliant on 
the phrase ``obstructs, impairs, or conditions'' as the basis for a 
preemption determination, we believe that validity of the precedent 
would need to be reexamined to ascertain whether the determination is 
consistent with the Barnett conflict preemption analysis as discussed 
above.\43\
---------------------------------------------------------------------------

    \42\ We decline commenters' request that we also delete this 
language from the OCC's bank operations rule at 12 CFR 7.4009 rather 
than eliminating the rule in its entirety. We have not had occasion 
to apply this rule to particular types of state laws and therefore 
its removal should not create uncertainty about the validity of 
prior precedent. The application of state consumer financial laws to 
national bank operations continues to be subject to a Barnett 
conflict preemption analysis.
    \43\ Under some circumstances, however, the preemptive effect of 
the former regulation could be preserved under Section 1043 of the 
Dodd-Frank Act. See Dodd-Frank Act, section 1043, 124 Stat. at 2014 
(to be codified at 12 U.S.C. 5553). The OCC has not identified any 
OCC-issued preemption precedent that rested only on the ``obstruct, 
impair, or condition'' formulation.
---------------------------------------------------------------------------

    Some commenters also asserted that the preemption rules promulgated 
by the OCC in 2004 are not consistent with the Dodd-Frank Act, or with 
Barnett, because they identify categories and/or terms of state laws 
that are preempted; some of these commenters equated listing of 
categories of preempted state laws with field preemption. However, 
these rules are not based on a field preemption standard.\44\ They were 
based on the OCC's conclusion that the listed types and terms of state 
laws would be preempted by application of the conflict preemption 
standard of the Barnett decision.
---------------------------------------------------------------------------

    \44\ See McCormick v. Wells Fargo Bank, No. 3:08-0944, 2009 WL 
151588, at *2 (S.D. W.Va. Jan 22, 2009).
---------------------------------------------------------------------------

    The essence of the Barnett conflict preemption analysis is an 
evaluation of the extent and nature of an impediment posed by state law 
to the exercise of a power granted national banks under Federal 
law.\45\ The ``conflict'' that is analyzed in conflict preemption is 
the nature and scope of that impediment. Where the same type of 
impediment exists under multiple states' laws, a single conclusion of 
preemption can apply to multiple laws that contain the same type of 
impediment--that generate the same type of conflict with a Federally-
granted power. Accordingly, a conflict preemption analysis can be state 
law-specific, or it can apply to provisions or terms in more than one 
law that present the same type of conflict.\46\ But in all cases,\47\ 
there must

[[Page 43557]]

be a conflict that triggers preemption under the standard articulated 
in the Barnett decision.\48\ As detailed below, the Dodd-Frank Act's 
case-by-case procedural requirement applicable to future determinations 
regarding preemption of state consumer financial laws allows 
categorical determinations where multiple state laws are identified. 
The Act defines ``case-by-case basis'' as a determination by the 
Comptroller as to 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.
---------------------------------------------------------------------------

    \45\ As noted by the Court in Barnett, these Federal powers 
granted national banks may be ``both enumerated and incidental.'' 
517 U.S. at 32.
    \46\ See Dodd-Frank Act, section 1044(a), 124 Stat. at 2015 (to 
be codified at 12 U.S.C. 25b).
    \47\ The Barnett standard preemption provision of Dodd-Frank 
applies to questions concerning the applicability of state consumer 
financial laws to national banks; the principles of preemption 
articulated in the Barnett decision apply to quest