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Lawmakers from both political parties warned Thursday the risk retention proposal could spark a credit crunch and cripple community banks' effectiveness.
April 14 -
Depending on who you talked to, the risk-retention proposal out Tuesday would either restore sensible standards to the lending market or result in a significant credit crunch.
March 29 -
One of the most important pieces of the Dodd-Frank Act — regulators' risk retention proposal — is set to start falling into place Tuesday. Following is a guide to the plan.
March 28 -
Although bankers are likely to have significant concerns about the risk retention proposal due next week, they appear to have won at least one victory already: a choice over how to structure risk that must be retained.
March 24 -
Investors were spooked about what exactly two top administration officials meant last week when they said the GSEs would not be exempted from pending risk-retention requirements.
March 21 -
Two top Obama administration officials said Tuesday that the GSEs would not be exempted from a pending proposal to help standardize mortgages sold into the secondary market.
March 15
WASHINGTON — Even before the Dodd-Frank Act takes effect on July 21, a federal appeals court has cited the regulatory reform law in a ruling that a national bank does not have to comply with a Florida consumer protection statute that limits bank fees.
The 11th Circuit Court of Appeals affirmed a lower court's decision to dismiss a case claiming JP Morgan Chase Bank violated a state law that prohibits banks from charging check-cashing service fees. In his decision, Chief Judge Joel F. Dubina referred to the Dodd-Frank Act, which itself referred to the so-called Barnett standard established by the Supreme Court in 1996. The standard said that state law is prohibited from interfering with the business of banking.
"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," Dubina wrote.
Vida Baptista, who was not a Chase account holder, filed the class action lawsuit after the bank charged her a $6 fee to cash a check from a Chase customer.
A lower court found that OCC rules allow national banks to charge customers non-interest charges and fees. In addition, the OCC interprets "customer" as "any person who presents a check for payment"
Dubina said the court adopted the reasoning of the Fifth Circuit Court's decision in Wells Fargo Bank of Texas N.A. v. James, which used the Barnett standard to determine that OCC rules preempted a nearly identical statute in Texas.
"Congress clearly intended that the OCC be empowered to regulate banking and banking-related activities," Dubina wrote. "It is not unreasonable to define 'customer' as any person presenting a check for payment."
The court said the OCC specifically authorizes banks to charge fees to non-account-holders presenting checks for payment.
"The state's prohibition on charging fees to non-account holders, which reduces the bank's fee options by 50%, is in substantial conflict with federal authorization to charge such fees," Dubina said.
The decision is the first of what are likely to be several court cases that spar over Dodd-Frank's tweaks to preemption language. The OCC and several banking lawyers argue the reform law did not substantively affect preemption, while state regulators say it made it harder to preempt local law.
"It's probably the first word, but not the last word on the subject," said Laurence Hutt, a partner at Arnold & Porter. "It's significant not only because the decision upholds the decision of preemption . . . but it correctly indicates that under Dodd-Frank, you'd look at the test set forth in Barnett Bank."
Still, Hutt said the decision sent a good signal to national bank advocates.
"It presents a very hopeful sign to those of us who follow these things, and it's a very good first decision in this area," he said. "This is the first step, it's not the last step. So there are going to be a lot more decisions and a lot more challenges and a lot more cases, but it's good to have this one under our belt."
Ray Natter, a partner at Barnett Sivon & Natter and a former deputy chief counsel for the OCC, agreed the news was good for national banks.
"Regardless of whether it's technically a precedent or not, you can't take away from the fact that this is a high-level court that is interpreting the Dodd-Frank Act as retaining the Barnett standard," Natter said. "I read the case as saying that the preemption standard under Dodd-Frank is the same preemption standard that's been applied by the OCC since 1996, if not before."
But Buz Gorman, the general counsel for the Conference of State Bank Supervisors, said it's still not entirely clear what Congress meant by "prevent or significantly interfere," the language used in Dodd-Frank.
"We believe that Congressional intent clearly rolled back preemption in Dodd-Frank, but left room for judicial interpretation," Gorman said. "We think there are going to be other tough cases as well, until everyone has a clear understanding of what the standard in Dodd-Frank actually means."
