Research Paper on Federal Preemption
In mid-May, the Congressional Research Service (CRS), the research arm of the Library of Congress, issued a paper explaining the concept of federal preemption when it comes to state banking, business and consumer protection laws. You can read the full paper here. It's an interesting read, intended for well-informed audiences (spoiler: a lot of lawyer speak). That said, the paper explores:
- The construction of the dual banking system in the United States
- The history of federal preemption
- The flashpoint in the early 2000s, when the OCC used preemption powers to void the application of state predatory lending laws to national banks originating residential mortgages. As has been much discussed, the mortgage crisis soon followed and resulted in the largest number of home foreclosures since the Great Depression.
- Adjustments to preemption powers made in the Dodd-Frank Act of 2010 and the OCC's response
- A discussion of current issues: 1) whether nonbanks can export higher interest rates to states that set a lower limit; 2) the OCC's national bank charter for nonbanks such as fintech companies, which has been the subject of litigation with CSBS and the New York Department of Financial Services -- read CSBS's take on federal preemption here -- and 3) the conflict between state laws that legalize marijuana and federal law that prohibits it, and the resulting quandary for banks on whether they can provide banking services to these companies.