[Federal Register Volume 65, Number 10 (Friday, January 14, 2000)]
[Notices]
[Pages 2455-2456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-968]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency
[Docket No. 00-01]


Notice of Request for Preemption Opinion

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

ACTION: Notice and request for comments.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
publishing for comment a written request for our opinion on whether a 
Pennsylvania statute regulating auctioneers applies to a national bank 
that uses an auction format to market and sell certificates of deposit 
(CDs) over the Internet. The purpose of this notice is to afford 
interested persons an opportunity to submit comments before the OCC 
issues a final opinion responding to this request.

DATES: Comments must be received on or before February 14, 2000.

ADDRESSES: You may submit comments electronically to 
[email protected] or by mail to Docket No. 00-01, 
Communications Division, Third Floor, Office of the Comptroller of the 
Currency, 250 E St., SW, Washington, DC 20219. Comments will be 
available for inspection and photocopying at that address.

FOR FURTHER INFORMATION CONTACT: Mark Tenhundfeld, Assistant Director, 
Legislative and Regulatory Activities Division, (202) 874-5090.

SUPPLEMENTARY INFORMATION: A national bank headquartered in 
Pennsylvania (the Bank) uses an auction format to market and sell CDs 
over the Internet, an activity referred to in this Notice as the 
``online deposit program.'' A Pennsylvania statute requires that 
auctioneers be licensed and subjects them to examination and inspection 
by the state. The Bank has submitted a written request for the OCC's 
opinion on whether Federal law preempts the application of the 
Pennsylvania statute to the Bank's online deposit program.
    Section 114 of the Riegle-Neal Interstate Banking and Branching

[[Page 2456]]

Efficiency Act of 1994 \1\ requires the OCC to publish notice in the 
Federal Register before issuing a final written opinion about the 
preemptive effect of Federal law in four specified areas: community 
reinvestment, consumer protection, fair lending, or the establishment 
of interstate branches. It is not clear that the Pennsylvania statute 
under review falls within one of the four areas covered by section 114. 
The Bank's written submission does not address this issue. 
Nevertheless, in light of the novelty of the preemption question 
presented by the Bank--the applicability of state law to national banks 
that provide traditional financial services through electronic means--
comments from interested parties will aid the OCC in considering the 
Bank's request. Therefore, we have concluded that it is appropriate to 
publish a notice and request comment on the Bank's request. We will 
also publish any final written opinion responding to the request in the 
Federal Register.
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    \1\ Pub. L. 103-328, sec. 114, 108 Stat. 2338, 2366-68 (1994), 
codified at 12 U.S.C. 43. This publication requirement is subject to 
certain exceptions that are described in section 114(c) of the 
statute.
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The Bank's Online Deposit Program

    The Bank is headquartered in Pennsylvania and has branches in four 
other states. The Bank's Internet website permits visitors to link to a 
site (the Auction Site) on which the Bank offers potential customers 
the opportunity to purchase CDs that it issues and that are priced 
through an online auction process, which the Bank describes as follows.
    The Bank periodically posts on the Auction Site a notice of an 
online auction of CDs offered by the Bank. Each auction has a starting 
and ending time and identifies the dollar amount, the term, the 
quantity, and the maximum annual percentage yield (APY) of the CDs 
offered. For example, an auction might contain 100 CDs, each with a 
face amount of $10,000, a term of six months, and a maximum APY of 8%. 
In this case, the 100 bids with the lowest APY equal to or below 8% 
will be selected as the winning bidders. The winning bidders are 
required to complete an application to purchase a CD at their 
respective bid prices, pursuant to terms and conditions that the Bank 
has established for the online deposit program and that are posted on 
the Auction Site.\2\
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    \2\ The Bank's request to the OCC contains additional 
information about its online deposit program, including eligibility 
requirements for CD purchasers and the mechanics of the bidding 
process, that is not pertinent to the preemption issue. The Bank 
represents that it maintains the confidentiality of information 
provided by participants in the online deposit program in accordance 
with its privacy policy, which is posted on the Auction Site.
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The Pennsylvania Auction Statute

    The Pennsylvania auction statute is codified at 63 Pa. Stat. 
Sec. 734 et seq. (1998). It governs the licensing and regulation of 
persons--``auctioneers''--engaged in the sale of property at auction. 
The Pennsylvania statute defines an ``auction'' as

    the offer to sell property to the members of an audience 
congregated for the purpose of making bids for the purchase of 
property in an effort by the auctioneer or apprentice auctioneer to 
advance the amount of the bids to obtain the highest or most 
favorable offer.\3\
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    \3\ 63 Pa. Stat. at Sec. 734.2.
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    Auctioneers must be licensed by the State Board of Auctioneer 
Examiners \4\ and are required to keep detailed records of sales of 
property at auction.\5\ Pennsylvania auctioneers are subject to 
examination by the state.\6\ An auctioneer who fails to obtain a 
license is subject to civil and criminal penalties.\7\ The Pennsylvania 
statute permits either individuals or corporations to be auctioneers, 
and the Bank believes that a corporation that employs an individual 
auctioneer may have to be licensed both as an auctioneer and as an 
auction company.
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    \4\ Id. at Sec. 734.3.
    \5\ Id. at Sec. 734.16.
    \6\ Id. at Sec. 734.20.
    \7\ Id. at Sec. 734.29.
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Issues Presented by the Bank

    The Bank asserts that Federal law authorizes it to conduct the 
online deposit program, that the licensing, recordkeeping, and 
examination requirements in the Pennsylvania auction statute 
impermissibly condition and burden the exercise of this Federal 
authority, and that the Pennsylvania statute is therefore preempted. 
The Bank relies on the express authority provided by 12 U.S.C. 
24(Seventh) to ``receive deposits,'' on the incidental powers clause of 
12 U.S.C. 24(Seventh), and on the OCC's regulation at 12 CFR 7.1019, 
which authorizes national banks to perform, provide, or deliver through 
electronic means any authorized product or service.
    The Bank also cites a line of national bank preemption cases 
decided by the U.S. Supreme Court and culminating in the Court's 
decision in Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 
(1996), in support of its position that a state may not regulate an 
activity that a national bank is Federally authorized to conduct. The 
Bank notes that its use of the online Auction Site may constitute the 
promotion and advertising of its deposit products and that the Supreme 
Court has specifically held that a state law purporting to limit or 
restrict national bank advertising is preempted.\8\ In addition, the 
Bank relies on prior OCC interpretive letters opining that state laws 
purporting to apply licensing requirements to national banks' Federally 
authorized activities are preempted.\9\ Finally, the Bank asserts that 
application of the Pennsylvania statute to its online auction 
activities is preempted because the national bank visitorial powers 
statute, 12 U.S.C. 484, vests the OCC with exclusive authority to 
examine and supervise national banks.
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    \8\ See Franklin Nat'l Bank v. New York, 347 U.S. 373 (1954).
    \9\ See, e.g., OCC Interpretive Letter No. 749 (Sept. 13, 1996) 
(opining that state law requiring licensing of national banks' 
annuities sales activities is preempted); OCC Interpretive Letter 
No. 628 (July 19, 1993) (opining that state securities board 
regulation requiring a national bank providing trust services to 
register as an investment adviser is preempted).
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Request for Comments

    The OCC solicits comment on whether Federal law preempts the 
Pennsylvania auction statute as it would apply to the Bank's online 
deposit program.

    Dated: January 4, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-968 Filed 1-13-00; 8:45 am]
BILLING CODE 4810-33-P