[Federal Register Volume 65, Number 54 (Monday, March 20, 2000)]
[Notices]
[Pages 15037-15041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6865]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 00-08]


Preemption Determination

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

ACTION: Notice.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
publishing its response to a written request for the OCC's 
determination of whether federal law preempts the application of 
Pennsylvania laws regulating auctioneers. The OCC has determined that, 
if the state law applied, it would be preempted under federal law.

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 
certificates of deposit (CDs) over the Internet. The Bank's Internet 
website permits visitors to link to a 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. Interested parties 
submit bids equal to or below the maximum annual percentage yield that 
the Bank will pay on the CDs, with the winning bidders being those 
submitting the lowest bids. The winning bidders then complete an 
application to purchase the CDs pursuant to the terms and conditions 
established by the Bank as posted on the auction site.
    A Pennsylvania statute \1\ requires that auctioneers be licensed 
and subjects them to examination and inspection by the state. It 
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.\2\
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    \1\ 63 Pa. Stat. section 734 et seq.
    \2\ Id. at Sec. 734.2.
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    Auctioneers are required to keep detailed records of sales of 
property at auction.\3\ They are subject to civil and criminal 
penalties if they fail to obtain a license.\4\ The Pennsylvania law 
permits either individuals or corporations to be auctioneers, thereby 
leading the Bank to conclude 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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    \3\ Id. at Sec. 734.16.
    \4\ Id. at Sec. 734.29.
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    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 auction program. The Bank asserted that 
federal law authorizes it to conduct the online auction program, and 
that the licensing, recordkeeping, and examination requirements in the 
Pennsylvania auction statute impermissibly condition and burden the 
exercise of this federal authority. The Bank relies on the express 
authority of 12 U.S.C. 24(Seventh) to receive deposits, on the 
incidental powers clause of Sec. 24(Seventh), and on the OCC's 
regulation at 12 CFR 7.1019, which authorizes a national bank to do 
electronically that which it may do by other means. The Bank concludes 
that the state law conflicts with these federal laws and violates the 
OCC's exclusive visitorial power to examine and supervise national 
banks.
    Section 114 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 \5\ 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. Section 114 also requires the OCC to publish 
any final opinion letter in which the OCC concludes that federal law 
preempts a state law in one of the four specified areas. Although it is 
not clear that the Pennsylvania statute under review falls within one 
of the four areas covered by section 114, the OCC nevertheless 
published a notice of the request in the Federal Register in light of 
the novelty of the question presented (namely, the applicability of 
state law to national banks that provide traditional financial services 
through electronic means),\6\ and is publishing its response to the 
preemption request as an appendix to this notice.
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    \5\ Pub. L. 103-328, sec. 114, 108 Stat. 2338, 2366-68 (1994), 
codified at 12 U.S.C. 43.
    \6\ 65 FR 2455 (January 14, 2000).
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    As is explained in greater detail in the response, the OCC agrees 
that the activities in question--receiving deposits, marketing, and 
using electronic means to engage in permissible activities--are 
authorized by federal law. The OCC also agrees that the state law, if 
it is applied to the Bank's online auction program, would be preempted, 
because it would limit or condition the ability of the Bank to exercise 
its powers under federal law, would frustrate the purposes for which 
the national banking system was established, and would violate the 
OCC's exclusive visitorial powers.

    Dated: March 14, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.

Appendix

March 7, 2000.
Thomas P. Vartanian,
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004-7008
Re: Online Deposit Program
    Dear Mr. Vartanian: This responds to your letter dated December 10, 
1999 (the

[[Page 15038]]

``Letter''), in which you requested confirmation by the Office of the 
Comptroller of the Currency of your view that federal law preempts a 
Pennsylvania statute regulating the conduct of auctions under the 
circumstances described in your letter. For the reasons discussed 
below, we conclude that federal law would preempt such a state law if 
it were found to apply to your client's online auction program.

Background

    The bank in question (``Bank'') is a national bank headquartered in 
Pennsylvania with offices in several other states. It markets 
certificates of deposit (``CDs'') over the Bank's website on the 
Internet through an online auction program. The rate paid on those CDs 
is determined by bids submitted by people who participate in the 
auction. Each auction has a starting and ending time and identifies the 
dollar face amount, the term, the quantity, and the maximum annual 
percentage yield (``APY'') of the CDs that are being offered. If, for 
example, the Bank offers 100 CDs at a stated maturity and face amount 
with a maximum APY of 8%, the 100 bids with the lowest APY equal to or 
below 8% will be selected as the winning bidders.
    You note that Pennsylvania has a statute governing auctions, and 
that the statute defines ``auction'' as--
    [t]he offer to sell property by an auctioneer or apprentice 
auctioneer 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.
63 Pa. Stat. Sec. 734.2 (1998). This statute requires auctioneers 
(which includes both individuals and corporations) to be licensed by 
the Pennsylvania Board of Auctioneer Examiners (id. at Sec. 734.3), and 
contemplates the payment of a license fee in connection with the filing 
of an application to obtain a license (id. at Sec. 734.6). Under the 
statute, Pennsylvania auctioneers are required to keep records of sales 
of property at auction (id. at Sec. 734.16) and are subject to 
examination by the state (id. at Sec. 734.20). Auctioneers are required 
to pay examination fees which, together with licensing application fees 
and other fees imposed on auctioneers, must be sufficient to pay for 
whatever enforcement efforts are required under the Pennsylvania law 
(id. at Sec. 734.6(b)). You suggest that these statutes may apply to 
the Bank's online auction program, and you request confirmation that 
federal law would preempt the state laws.
    The OCC published a notice of your request in the Federal 
Register,\1\ inviting interested parties to comment on whether federal 
law preempts the Pennsylvania auctioneer laws. Four comments were 
received in response to the notice. Three commenters opined that 
federal law does preempt the type of state law in question. Each of 
these commenters cited the authority of national banks under 12 U.S.C. 
Sec. 24(Seventh) to engage in deposit-taking activities and other 
activities necessary to carry on the business of banking. Each also 
noted that federal law preempts state laws that purport to regulate an 
activity that is authorized by federal law. The fourth comment was 
submitted by the Chief Counsel of the Pennsylvania Department of 
Banking (Banking Department), who, after speaking with counsel to the 
Pennsylvania Board of State Auctioneers (the Board), stated that, in 
the view of the Board staff, the Pennsylvania auction laws do not apply 
to the Bank's online auction program. While this comment by the Banking 
Department, representing the views of the staff of the Board, might 
settle the issue in Pennsylvania for the time being, we have concluded, 
in light of the non-binding nature of those staff views, that it still 
would be useful to respond to the question you posed in order to 
provide an advisory opinion on the application of preemption principles 
when banking activities, such as the activity in question, are 
conducted over the Internet.
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    \1\ 65 Fed. Reg. 2455 (January 14, 2000) (the Notice). As stated 
in the Notice, section 114 of the Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 (Pub. L. 103-328, sec. 114, 108 
Stat. 2338, 2366-68 (1994), codified at 12 U.S.C. Sec. 43) requires 
the OCC to publish notice in the Federal Register before issuing a 
final written opinion about the preemptive effect of federal law in 
the areas of community reinvestment, consumer protection, fair 
lending, and the establishment of interstate branches. While it is 
not clear that the Pennsylvania statutes in question fall within one 
of these four areas, the OCC decided to invite comments on the 
issues raised in your letter given the novelty of addressing 
preemption in the context of national banks providing traditional 
financial services through electronic means.
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Analysis

Permissibility of the Activity

    The threshold question in any preemption analysis is whether the 
activities in question are permissible for a national bank under 
federal law. If they are not, then there is no preemption issue.
    There are essentially three components to the Bank's activities 
here. First, the Bank is engaging in an authorized banking activity--
deposit-taking. Second, it is marketing one of its deposit products. 
Third, it is using the Internet to conduct these deposit-taking and 
marketing activities. Each of these activities is permissible under 12 
U.S.C. 24(Seventh).
    Section 24(Seventh) specifically authorizes national banks to 
receive deposits. Thus, a national bank need look no further than the 
express language of the statute for authorization to accept deposits.
    Section 24(Seventh) also authorizes national banks to engage in the 
more general ``business of banking'' and activities incidental thereto. 
The Supreme Court has made clear that the ``business of banking'' 
authorized by section 24(Seventh) is a broad, flexible concept that 
allows the National Bank Act to adapt to changing times. See 
NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. 
Corp., 513 U.S. 251, 258, n.2 (1995) (``We expressly hold that the 
``business of banking'' is not limited to the enumerated powers in 
section 24 Seventh and that the Comptroller therefore has discretion to 
authorize activities beyond those specifically enumerated.''). An 
activity will be deemed ``incidental'' to the business of banking if it 
is ``convenient or useful in connection with the performance of '' a 
power authorized under federal law. Arnold Tours, Inc. v. Camp, 472 
F.2d 427, 432 (1st Cir. 1972). Clearly, the authority under section 
24(Seventh) is sufficiently broad to permit a national bank to market 
its products and services. See Franklin National Bank v. New York, 347 
U.S. 373, 377 (1954).
    Finally, the OCC has clearly established that a permissible 
activity is equally authorized regardless of whether it is conducted in 
a traditional manner or through an electronic medium. See 12 CFR 7.1019 
(``A national bank may perform, provide, or deliver through electronic 
means and facilities any activity, function, product, or service that 
it is otherwise authorized to perform, provide, or deliver.'').
    Thus, each of the activities that together comprise the Bank's 
online auction program is permissible under well-settled authority.

Preemptive Effect of Federal Law

    As previously noted, at a staff level, the Board has indicated that 
its auction laws would not apply to the Bank's online auction program. 
However, given the unique nature of the Internet that enables the Bank 
to offer the online auction program in every state simultaneously and 
the possible

[[Page 15039]]

application of other laws in other jurisdictions,\2\ and in view of the 
non-binding nature of the communication of the staff's views, we 
believe it is appropriate to provide guidance on the preemptive effect 
of federal law in the context of state auction laws that are found to 
apply to auctions conducted over the Internet.\3\
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    \2\ You note in your letter that laws similar to the 
Pennsylvania law have been adopted in other states. For instance, 
Kentucky requires a person seeking to be licensed as an auctioneer 
to serve two years as an apprentice and to pass an examination (Ky. 
Rev. Stat. Sec. 330.070), Ohio requires an applicant to complete a 
course of study and serve an apprenticeship for at least twelve 
months during which time he or she must participate in at least 
twelve auctions (Ohio Rev. Code Sec. 4707.09), and Pennsylvania 
requires a person to serve a two-year apprenticeship, pass an 
examination, and participate in at least 30 auctions (63 Pa. Stat. 
Sec. 734.5). A licensed auctioneer in Pennsylvania may have only one 
apprentice at any one time, while in Ohio, a licensed auctioneer may 
have two apprentices. At least one state has passed an auction law 
that would purport to apply to online auctions. See the Illinois 
Auction License Act, Public Act 91-0603, effective January 1, 2000.
    \3\ This letter assumes, solely for the sake of analysis, that a 
given state's laws would apply to the Bank's online auction program. 
We note, however, that the law governing ``prescriptive'' 
jurisdiction (i.e., the jurisdiction to regulate conduct, as opposed 
to ``procedural'' jurisdiction, which is the ability to summon a 
party into a given court) in the context of commerce conducted over 
the Internet is not settled. For a discussion of some of the 
jurisdictional issues presented by Internet commerce, see the 
American Bar Association's Project on Internet Jurisdiction at 
http://www.kentlaw.edu/cyberlaw/. By assuming for the sake of the 
preemption analysis that a state's laws would apply to the Bank's 
online auction program, we are not expressing any views on the 
applicability of a particular state law purporting to regulate 
online auctions conducted by national banks.
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    We believe that a court likely would find that federal law preempts 
laws of the sort adopted by Pennsylvania, assuming they are found to 
apply to a national bank's online activities, because they would 
conflict with federal law authorizing the Bank to engage in the 
activities in question and they would violate the OCC's exclusive 
visitorial powers over national banks. These points are addressed in 
more detail below, following a brief summary of the law governing 
preemption and the OCC's visitorial powers.

Preemption and Visitorial Powers

    When the federal government acts within the sphere of authority 
conferred upon it by the Constitution, federal law is paramount over, 
and may preempt, state law. U.S. Const. art. VI, cl. 2 (the Supremacy 
Clause); Cohen v. Virginia, 19 U.S. (6 Wheat.) 264, 414 (1821) 
(Marshall, C.J.). Federal authority over national banks stems from 
several constitutional sources, including the Necessary and Proper 
Clause and the Commerce Clause of the United States Constitution. U.S. 
Const. art. I, Sec. 8, cl.3, cl. 18; McCulloch v. Maryland, 17 U.S. (4 
Wheat.) 316, 409 (1819).
    The United States Supreme Court has identified several bases for 
federal preemption of state law. First, Congress may expressly state 
that it intends to preempt state law. E.g., Jones v. Rath Packing Co., 
430 U.S. 519 (1977). Second, a federal statute may create a scheme of 
federal regulation ``so pervasive as to make reasonable the inference 
that Congress left no room for the States to supplement it.'' Rice v. 
Norman Williams Co., 458 U.S. 654, 659 (1982). Third, the state law may 
conflict with a federal law. See, e.g., Franklin National Bank, supra; 
Davis v. Elmira Savings Bank, 161 U.S. 275 (1896). In elaborating on 
this third test, the Supreme Court has stated--

    federal law may be in ``irreconcilable conflict'' with state 
law. Rice v. Norman Williams Co., 458 U. S. 654, 659 (1982). 
Compliance with both statutes, for example, may be a ``physical 
impossibility,'' Florida Lime & Avocado Growers, Inc. v. Paul, 373 
U. S. 132, 142-143 (1963); or, the state law may ``stan[d] as an 
obstacle to the accomplishment and execution of the full purposes 
and objectives of Congress.'' Hines v. Davidowitz, 312 U. S. 52, 67 
(1941).

    Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 31 (1996). 
The Court in Barnett went on to state that--

    In defining the pre-emptive scope of statues and regulations 
granting a power to national banks, these cases [i.e., national bank 
preemption cases] take the view that normally Congress would not 
want States to forbid, or to impair significantly, the exercise of a 
power that Congress explicitly granted. To say this is not to 
deprive States of the power to regulate national banks, where * * * 
doing so does not prevent or significantly interfere with the 
national bank's exercise of its powers.

517 U.S. at 33.
    A conflict between a state law and federal law need not be complete 
in order for federal law to have preemptive effect. If a state law 
places limits on an unrestricted grant of authority under federal law, 
the state law will be preempted. See, e.g., New York Bankers 
Association, Inc. v. Levin, 999 F. Supp. 716 (W.D.N.Y. 1998). Moreover, 
federal law preempts not only state laws that purport to prohibit a 
national bank from engaging in an activity permissible under federal 
law but also state laws that condition the exercise by a national bank 
of its express or incidental powers. As stated in Barnett,

    * * * where Congress has not expressly conditioned the grant of 
``power'' upon a grant of state permission, the Court has ordinarily 
found that no such condition applies. In Franklin Nat. Bank, the 
Court made this point explicit. It held that Congress did not intend 
to subject national banks' power to local restrictions, because the 
federal power-granting statute there in question contained ``no 
indication that Congress [so] intended * * * as it has done by 
express language in several other instances.''

517 U.S. at 34 (citations omitted; emphasis in original).
    When reviewing the application of state laws to national banks, the 
Supreme Court's analysis is informed by the unique purposes for which 
the national banking system was created. Through the national charter, 
Congress has established a banking system intended to be both 
nationwide in scope and uniform in character.\4\ As stated by the 
Supreme Court in Easton v. Iowa, 188 U.S. 220 (1903), federal 
legislation affecting national banks ``has in view the erection of a 
system extending throughout the country, and independent, so far as the 
powers conferred are concerned, of state legislation which, if 
permitted to be applicable, might impose limitations and restrictions 
as various and as numerous as the states.'' Id. at 229. See also Davis, 
supra, at 283 (``This freedom from State control over a national bank's 
powers protects national banks from conflicting local laws unrelated to 
the purpose of providing the uniform, nationwide banking system that 
Congress intended.''); Farmers' & Merchants National Bank v. Dearing, 
91 U.S. 29, 33-34 (1875) (``National banks organized under [the 
National Bank A]ct are instruments designed to be used to aid the 
government in the administration of an important branch of the public 
service. They are means appropriate to that end. * * * Being such 
means, brought into existence for this purpose, and intended to be so 
employed, the States can exercise no control over them, nor in any wise 
affect their operation, except in so far as Congress may see proper to 
permit. Any thing beyond this is ``an abuse, because it is the 
usurpation of power which a

[[Page 15040]]

single State cannot give.'') (citations omitted).
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    \4\ One of the original purposes of the national banking system 
was to foster a stable and unitary banking and financial system. The 
sponsors of the national system expected that State banks would 
cease to exist and national banks, centrally and uniformly 
regulated, would replace them. See, e.g., B. Hammond, Banks and 
Politics in America from the Revolution to the Civil War, 724-34 
(1957); P. Studenski & H. Krooss, Financial History of the United 
States, 154-55, 178-79 (1st ed. 1952); Hackley, Our Baffling Banking 
System, 52 Va. L. Rev. 565, 571-73 (1966). Subsequent developments 
led to the continuation of State banks. However, the original 
purpose that national banks would be uniformly and centrally 
governed continues.
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    The Supreme Court has consistently relied on the special federal 
purpose of national banks as an important reason for concluding that 
national bank powers normally are not limited by state law. Congress 
created the national bank charter to serve the purpose of providing a 
uniform, nationwide banking system. Through national banks, Congress 
intended to promote the nationwide availability of private credit and 
other banking services vital to economic development and expansion. As 
stated by the Court in Davis, supra:

    National banks are instrumentalities of the Federal government, 
created for a public purpose, and as such necessarily subject to the 
paramount authority of the United States. It follows that an attempt 
by a State to define their duties, or control the conduct of their 
affairs is absolutely void, wherever such attempted exercise of 
authority expressly conflicts with the laws of the United States, 
and either frustrates the purpose of the national legislation, or 
impairs the efficiency of these agencies of the Federal government 
to discharge the duties for the performance of which they were 
created. This freedom from State control over a national bank's 
powers protects national banks from conflicting local laws unrelated 
to the purpose of providing the uniform, nationwide banking system 
that Congress intended.

161 U.S. at 283. More recently, the Supreme Court, after quoting 
approvingly the language from Davis about national banks being 
instrumentalities of the federal government, went on to state that 
``[c]lose examination of the National Bank Act of 1864, its legislative 
history, and its historical context makes clear that, contrary to the 
suggestion of petitioners, Congress intended to facilitate what 
Representative Hooper termed a `national banking system.' '' Marquette 
National Bank v. First of Omaha Corp., 423 U.S. 299, 314-315 (1978) 
(citations omitted). See also First National Bank of San Jose v. 
California, 262 U.S. 366, 369 (1923) (FNB San Jose) (``[A]ny attempt by 
a state to define [national banks'] duties or control the conduct of 
their affairs is void, whenever it conflicts with the laws of the 
United States or frustrates the purposes of the national legislation, 
or impairs the efficiency of the bank to discharge the duties for which 
it was created.'').
    Consistent with the goal of establishing a nationwide banking 
system, Congress vested the OCC with the authority to determine whether 
a national bank is engaging in permissible activities. Under 12 U.S.C. 
484 and other federal statutes (see, e.g., 12 U.S.C. 93, 481, and 
1818), the OCC has exclusive visitorial powers over national banks 
except as otherwise expressly provided by federal law. Guthrie v. 
Harkness, 199 U.S. 148 (1905); Bank One Texas, N.A. v. Patterson, No. 
3:93-CV-108-G (N.D. Tex. Sept. 9, 1994), aff'd 68 F.3d 469 (5th Cir. 
1995). These powers include the right to examine a bank, inspect a 
bank's books and records, regulate and supervise activities authorized 
or permitted pursuant to federal banking law, and enforce compliance 
with any applicable federal or state laws concerning those activities. 
12 CFR 7.4000(a)(2). See also First National Bank of Youngstown v. 
Hughes, 6 F. 737, 740-41.

Application of Federal Law to State Statutes

    State licensing laws such as the Pennsylvania auction law, to the 
extent that they are found to apply to the Bank's online activities, 
present several potential conflicts with federal law.\5\
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    \5\ Because the activities in question do not involve the 
business of insurance, the unique preemption standard established 
under the McCarran-Ferguson Act is not at issue. 15 U.S.C. 1012. Nor 
are the recently enacted provisions of the Gramm-Leach-Bliley Act. 
Pub. L. 106-102, sec. 104 (to be codified at 15 U.S.C. 6701).
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    First, the state laws that require licensing by, and the payment of 
a fee to, a state would be preempted because they would ``stan[d] as an 
obstacle to the accomplishment and execution of the full purposes and 
objectives of Congress.'' Hines, 312 U.S. at 67. Clearly, Congress 
intended to permit national banks to engage in, among other things, 
deposit-taking activities when it enacted 12 U.S.C. 24(Seventh). 
Congress also intended that national banks would have available to them 
``all such incidental powers as shall be necessary to carry on the 
business of banking,'' including the power to market the bank's 
products and services. See Franklin, supra. The online auction program 
is simply another way to engage in these activities. To the extent that 
a state asserts the right to restrict or condition a national bank's 
exercise of the federally granted powers, that state's law will be 
preempted. Barnett, supra, at 34; Franklin, supra, at 378; Bank of 
America National Trust & Savings Ass'n v. Lima, 103 F. Supp. 916, 918, 
920 (D. Mass. 1952) (exercise of national bank powers is not subject to 
state approval; states have no authority to require national banks to 
obtain a license to engage in an activity permitted to them by federal 
law.). See also OCC Interpr. Ltr. No. 866 (Oct. 8, 1999) (state law 
requirements that purport to preclude national banks from soliciting 
trust business from customers located in states other than where the 
bank's main office is located would be preempted); OCC Interpr. Ltr. 
No. 749 (Sept. 13, 1996) (state law requiring national banks to be 
licensed by the state to sell annuities would be preempted); OCC 
Interpr. Ltr. 644 (March 24, 1994) (state registration and fee 
requirements imposed on mortgage lenders would be preempted).\6\
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    \6\ We note that the exercise of permissible federal banking 
powers over the Internet may present preemption issues unique to the 
Internet context. There may be instances, beyond licensing and 
examination laws, where states would assert prescriptive 
jurisdiction (see footnote 3 for a description of ``prescriptive 
jurisdiction'') over an activity performed via the Internet. If the 
debate over prescriptive jurisdiction is resolved in a way that 
subjects an entity engaged in commerce over the Internet to 
substantive requirements imposed by every state in the country, this 
could create a situation where the state laws collectively present 
such a significant impairment or interference with the activity that 
federal law would be found to preempt them. However, because we are 
faced in the instant situation with state licensing and examination 
laws that would be preempted according to well-established 
preemption principles, we need not address this issue here.
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    Second, state regulation of the Bank's online auction program would 
be inconsistent with the purpose of creating a uniform, nationwide 
banking system. The Internet presents financial institutions with the 
opportunity to offer banking products and services efficiently to 
anyone with access to the Internet. By so doing, the Internet greatly 
facilitates the operation of the nationwide banking system envisioned 
by Congress when it established the national bank charter. Supplanting 
the primary federal regulator's supervision and regulation of an 
activity conducted nationwide would present a significant interference 
with the efficient operation of the national banking system.\7\
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    \7\ While the Internet is a medium of communication available 
both to state banks and national banks, this does not change the 
fact that the Internet facilitates the operation of the ``uniform, 
nationwide banking system that Congress intended.'' Davis, supra, 
161 U.S. at 283.
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    Finally, the application by a state of its auctioneer licensing 
laws would violate the exclusive visitorial authority vested in the 
OCC. As previously noted, only the OCC may determine whether a national 
bank is engaging in activities permissible under federal law. See, 
e.g., 12 U.S.C. 484; 12 CFR 7.4000(a)(2). A state law that purports to 
vest this authority in a state (by, for instance, applying licensing 
and qualification requirements to national banks \8\) is

[[Page 15041]]

preempted by the OCC's exclusive visitorial authority.
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    \8\ Kentucky requires a person seeking to be licensed as an 
auctioneer to serve two years as an apprentice and to pass an 
examination (Ky. Rev. Stat. Sec. 330.070), Ohio requires an 
applicant to complete a course of study and serve an apprenticeship 
for at least twelve months during which time he or she must 
participate in at least twelve auctions (Ohio Rev. Code 
Sec. 4707.09), and Pennsylvania requires a person to serve a two-
year apprenticeship, pass an examination, and participate in at 
least 30 auctions (63 Pa. Stat. Sec. 734.5). A licensed auctioneer 
in Pennsylvania may have only one apprentice at any one time, while 
in Ohio, a licensed auctioneer may have two apprentices.
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Conclusion

    If the Pennsylvania auction laws were to apply to the Bank's online 
auction program, we believe that federal law would preempt the state 
laws. We trust that this is responsive to your inquiry. Our conclusions 
are based on the facts and representations made in your letter. Any 
material change in facts or circumstances could affect the conclusions 
stated in this letter.

      Sincerely,
Julie L. Williams,
First Senior Deputy Comptroller and Chief Counsel.
[FR Doc. 00-6865 Filed 3-17-00; 8:45 am]
BILLING CODE 4840-33-P