[Congressional Record (Bound Edition), Volume 155 (2009), Part 24]
[Extensions of Remarks]
[Pages 32627-32628]
[From the U.S. Government Publishing Office, www.gpo.gov]




STATEMENT ON H.R. 4173, THE WALL STREET REFORM AND CONSUMER PROTECTION 
                              ACT OF 2009

                                 ______
                                 

                          HON. MELISSA L. BEAN

                              of illinois

                    in the house of representatives

                      Wednesday, December 16, 2009

  Ms. BEAN. Madam Speaker, as the principal author of the compromise 
provision regarding the preemption of State consumer financial laws 
under the National Bank Act and the Home Owners Loan Act that was 
included in the manager's amendment on page 139 to 150, I wanted to 
take this opportunity to explain to my colleagues my intention in 
drafting the language.
  The compromise language made improvements in several areas to allow 
national banks and Federal savings associations, which are institutions 
that operate under a national charter to comply with a uniform national 
standard where appropriate. I would like to further explain four 
components of the compromise specifically for the House. Those 
components include (1) limiting the scope of new preemption procedures 
to State consumer financial laws, so as not to affect preemption for 
other State laws; (2) the ability for categories of State consumer 
financial law to be preempted; (3) modifications of the preemption 
standard to more accurately reflect the Supreme Court Case of Barnett 
Bank v. Nelson, which established the preemption standard currently 
applied to national banks and Federal savings associations; and (4) the 
degree of deference afforded to the Office of the Comptroller of the 
Currency and Office of Thrift Supervision by the courts.
  First, under the compromise, the changes to preemption procedures 
under the National Bank Act for national banks and the Home Owners Loan 
Act for Federal savings associations are exclusively limited to State 
consumer financial laws. During the drafting of the compromise, I 
removed a sentence, previously suggested by the Committee that said 
national banks are to generally comply with State law. I removed this 
sentence because I wanted to make clear that the changes in the Act do 
not alter the preemption standards and precedents that apply to those 
State laws which are not State consumer financial laws. Narrowing the 
scope to just State consumer financial law is consistent with the 
initial scope of Subtitle D of H.R. 3126, The Consumer Financial 
Protection Act, when it was introduced in July 2009.
  Second, the compromise language included language that allows for 
categories of State consumer financial law to be preempted. This means 
that if the Comptroller of the Currency (the regulator of national 
banks) or the Director of the Office of Thrift Supervision (the 
regulator of Federal savings associations) determines a State consumer 
financial law in a particular state should be preempted because it 
``prevents, significantly interferes with, or materially impairs'' the 
abilities of a national bank or Federal savings association, then that 
specific determination can be applied to other States' consumer 
financial laws with equivalent terms. For example, if one state seeks 
to require additional disclosure requirements for credit cards that the 
Comptroller of the Currency determines ``prevents, significantly 
interferes with, or materially impairs'' the ability of a national bank 
to engage in the business of banking, that determination can be applied 
to another state's credit card disclosure laws if those laws have 
equivalent terms.
  Third, a critical portion of the compromise was drafting a preemption 
standard that embodied existing precedent. The preemption standard that 
was reported out of the Financial Services Committee stated that a 
State law could be preempted if it ``prevents or significantly 
interferes with'' the ability of a national bank (or a Federal savings 
association) to engage in the business of banking. ``Prevents or 
significantly interferes with'' has been often mentioned as the 
shorthand citation of the preemption standard established by the 
Supreme Court in 1996 in Barnett Bank v. Nelson. However, as I and many 
others have

[[Page 32628]]

noted, the Supreme Court ruling was not limited to those two terms as 
the only circumstance in which preemption of State laws is appropriate. 
In fact, they expanded on those words by saying that a State law should 
be preempted not only when it ``prevents or significantly interferes 
with,'' but also ``stands as an obstacle to the accomplishment of the 
purposes,'' ``encroach(es) on,'' ``destroy(s) or hamper(s),'' or 
``impair(s).''
  Since the Barnett case describes a number of situations in which 
State law is preempted, in addition to the ``prevents or significantly 
interferes with'' standard, I was concerned that limiting the 
underlying text to the shorthand expression of ``prevents or 
significantly interferes with'' could be construed as narrowing the 
Constitutional standard. I therefore added the words ``materially 
impairs,'' so that there would be no question that the preemption 
standard is the same as the standard described in Barnett, and that 
State consumer financial law may be preempted if it violates any of the 
well established Constitutional benchmarks for preemption. I chose the 
word ``materially'' because if the impairment is not material--meaning 
it would only have a negligible effect on the bank--it should not be 
subject to preemption under current law.
  When making preemption determinations on State consumer financial 
laws, the Comptroller of the Currency for national banks, Director of 
the Office of Thrift Supervision for Federal savings associations, or 
the Court must find that Federal law applicable to national banks and 
Federal savings associations, including regulations and similar 
issuances, deals with the subject or activity that the State consumer 
financial law is seeking to regulate. A good example is the detailed 
disclosure requirements set by Federal law and Federal regulators, 
developed after substantial consumer testing, that apply to certain 
types of consumer financial products.
  Finally, the compromise language is intended to clarify that when a 
court is reviewing an OCC determination concerning the proper 
interpretation of the National Bank Act or other Federal law that the 
OCC is charged with administering, the court is to apply the 
traditional deference accorded to an agency, often referred to as 
``Chevron'' deference. The same clarification applies when a court is 
reviewing an OTS determination regarding the proper interpretation of 
the Home Owners Loan Act or other Federal law that the OTS administers. 
Further, while the underlying legislation directed the courts to apply 
a different type of deference to OCC or OTS preemption determinations, 
the compromise amendment makes clear that the Chevron deference 
standard applies to all OCC and OTS interpretations of Federal law, the 
National Bank Act, and the Home Owners Loan Act, including those made 
in the context of a preemption determination.
  Madam Speaker, I thank you for the opportunity to further explain the 
preemption compromise I drafted in the manager's amendment.
  I yield back the balance of my time.

                          ____________________