Source: http://www.govpulse.us/entries/2011/07/21/2011-18231/office-of-thrift-supervision-integration-dodd-frank-act-implementation
Timestamp: 2015-07-31 15:25:14
Document Index: 345899718

Matched Legal Cases: ['art 4', 'art 4', 'art 4', '§ 4', 'art 4', 'art 4', 'art 4', 'art 4', 'art 4', 'arts 5', 'arts 5', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7', '§ 7']

govpulse | Office of Thrift Supervision Integration; Dodd-Frank Act Implementation
On May 26, 2011, the OCC published in the Federal Register a notice of proposed rulemaking (NPRM or proposal) to implement Title III, and certain other provisions, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) (Dodd-Frank Act or Act). Title III of the Act transfers the powers, authorities, rights and duties of the OTS to other banking agencies, including the OCC, on the “transferdate.” The transfer date is one year after the date of enactment of the Dodd-Frank Act, July 21, 2011. The Dodd-Frank Act also abolishes the OTS ninety days after the transfer date.
Specifically, the Dodd-Frank Act transfers to the OCC all functions of the OTS and the Director of the OTS relating to Federal savings associations. As a result, the OCC will assume responsibility for the ongoing examination, supervision, and regulation of Federal savings associations.
The Act also transfers to the OCC rulemaking authority of the OTS relating to all savings associations, both state and Federal.
The legislation continues in effect all OTS orders, resolutions, determinations, agreements, regulations, interpretive rules, other interpretations, guidelines, procedures and other advisory materials in effect the day before the transfer date, and allows the OCC to enforce these issuances with respect to Federal savings associations, unless the OCC modifies, terminates, or sets aside such guidance or until superseded by the OCC, a court, or operation of law.
Title III also transfers OTS employees to either the OCC or FDIC, allocated as necessary to perform or support the OTS functions transferred to the OCC and FDIC, respectively.
II. OCC Regulatory Actions To Integrate OTS Functions ↑
As part of this first phase of our review of OTS and OCC regulations, the OCC also will issue an interim final rule with a request for comments, effective on publication, that republishes those OTS regulations the OCC has the authority to promulgate and will enforce as of the transfer date, with nomenclature and other technical changes.
These republished regulations will supersede the OTS regulations in Chapter V for purposes of OCC supervision and regulation of Federal savings associations, and for certain rules for purposes of the FDIC's supervision of state savings associations. OTS regulations that will be unnecessary following the transfer of OTS functions to the OCC, or that are superseded as of the transfer date by provisions of the Dodd-Frank Act, will be repealed at a later date.
In future phases of our regulatory review, the OCC will consider more comprehensive substantive amendments, as necessary, to these regulations. For example, we may propose to repeal or combine provisions in cases where OCC and former OTS rules are substantively identical or substantially overlap. In addition, we may propose to repeal or modify OCC or former OTS rules where differences in regulatory approach are not required by statute or warranted by features unique to either charter. We expect to publish these amendments in one or more notices of proposed rulemaking, the first of which we expect to issue later in 2011. This substantive review also will provide an opportunity for the OCC to ask for comments suggesting revisions to the rules for both national banks and Federal savings associations that would remove provisions that are “outmoded, ineffective, insufficient, or excessively burdensome,” consistent with the goals outlined in an executive order recently issued by the President.
III. Description of the Proposal and Comments Received ↑
IV. Section-by-Section Description of Final Rule ↑
A. Part 4 ↑
The NPRM contained a number of amendments to part 4 to incorporate the supervision of Federal savings associations within the OCC. We received no substantive comments on the proposed amendments to part 4 and therefore adopt them as proposed, with one technical correction to § 4.14 to include cites to OCC rules applicable to savings associations.
1. Organization and Functions (Part 4, Subpart A) ↑
2. Freedom of Information Act (Part 4, Subpart B) ↑
Subpart B contains the OCC's rules for making requests for agency records and documents under the FOIA. The final rule amends subpart B to apply these rules to FOIA requests relating to Federal savings associations received by the OCC as of the transfer date, ensuresthat records of the OTS are subject to the OCC's FOIA regulations, and makes various technical changes to part 4 to correct technical errors and to update appropriate references to OCC units charged with handling FOIA requests. The final rule also provides that the OTS's former rules will continue to govern requests received by the OTS prior to the transfer date.
3. Non-Public Information (Part 4, Subpart C) ↑
4. One-Year Restrictions on Post-Employment Activities of Senior Examiners (Part 4, Subpart E) ↑
B. Dodd-Frank Act Amendments Affecting Approval of Change in Control Notices and Acceptance of Deposits by Federal Branches (Parts 5 and 28) ↑
C. Preemption and Visitorial Powers (Parts 5, 7, and 34) ↑
1. Dodd-Frank Act Provisions Affecting Preemption and Visitorial Powers ↑
The Dodd-Frank Act contains provisions, effective as of the transfer date (July 21, 2011), that affect the scope of preemption for operating subsidiaries, Federal savings associations, and national banks.
The Act also sets forth procedural requirements for future preemption determinations
and codifies the Supreme Court's visitorial powers decision in Cuomo v. Clearing House Association, L.L.C.
The Act precludes preemption of state law for national bank subsidiaries, agents and affiliates.
The Act also changes the preemption standards applicable to Federal savings associations to conform to those applicable to national banks. The Act specifically provides that, as of the transfer date, determinations by a court or by the OCC under the Home Owners' Loan Act (HOLA) with respect to Federal savings associations must be made in accordance with the laws and legal standards applicable to national banks regarding the application of state law.
The Act further provides that “state consumer financial laws”
may be preempted only if: (1) Application of such a law would have a “discriminatory effect” on national banks compared with state-chartered banks in that state; (2) “in accordance with the legal standard for preemption in the decision of the Supreme Court in”Barnett Bank of Marion County, N.A. v. Nelson,
the state consumer financial law “prevents or significantly interferes with the exercise by the national bank of its powers” (Barnett standard); or (3) the state consumer financial law is preempted by a provision of Federal law other than Title LXII of the Revised Statutes.
The Dodd-Frank Act imposes new procedures and consultation requirements with respect to how the OCC may reach certain future preemption determinations and clarifies the criteria for judicial review of these determinations. Specifically, the Act requires that the OCC make preemption determinations with regard to state consumer financial laws under the Barnett standard by regulation or order on a “case-by-case basis” in accordance with applicable law.
The Act defines “case-by-case basis” as a determination by the Comptroller as to the impact of a “particular” state consumer financial law on “any national bank that is subject to that law” or the law of any other state with substantively equivalent terms.
When making a determination under this provision that a state consumer financial law has substantively equivalent terms as the law the OCC is preempting, the OCCmust first consult with and take into account the views of the Consumer Financial Protection Bureau (CFPB).
The Dodd-Frank Act also requires there to be substantial evidence, made on the record of the proceeding, to support an OCC order or regulation that declares inapplicable a state consumer financial law under the Barnett standard.
Finally, the Act requires the OCC to conduct a periodic review, subject to notice and comment, every five years after issuing a preemption determination relating to a state consumer financial law and to publish a list of such preemption determinations every quarter.
Other features of the Dodd-Frank Act address the authority of state attorneys general to enforce applicable Federal and state laws. The National Bank Act, at 12 U.S.C. 484, vests in the OCC exclusive visitorial powers with respect to national banks, subject to certain express exceptions.
On June 29, 2009, the Supreme Court issued its opinion in Cuomo. The Court held that when a state attorney general files a lawsuit to enforce a state law against a national bank, “[s]uch a lawsuit is not an exercise of `visitorial powers' and thus the Comptroller erred by extending the definition of `visitorial powers' to include `prosecuting enforcement actions' in state courts.”
Conversely, the decision recognized the “regime of exclusive administrative oversight by the Comptroller”
applicable to national banks. Accordingly, under Cuomo, a state attorney general may bring an action against a national bank in a court of appropriate jurisdiction to enforce non-preempted state laws, but is restricted in conducting non-judicial investigations or oversight of a national bank.
The Dodd-Frank Act codifies the Supreme Court's decision in Cuomo regarding enforcement of state law against national banks by providing that no provision “of this title”
or other limits restricting the visitorial powers to which a national bank is subject shall be construed to limit or restrict the authority of any state attorney general to “bring an action against a national bank in a court of appropriate jurisdiction to enforce an applicable law and to seek relief as authorized by such law.”
In addition, the Act provides that these visitorial powers provisions shall apply to Federal savings associations and their subsidiaries to the same extent and in the same manner as if they were national banks or national bank subsidiaries.
2. Description of the Proposal ↑
First, we proposed rescission of 12 CFR 7.4006, which is the OCC's regulation concerning the application of state laws to national bank operating subsidiaries. The proposal also made conforming revisions to the OCC's operating subsidiary rules at 12 CFR 5.34(a) and paragraph (e)(3) to refer to new 12 U.S.C. 25b, which includes the codification of the Dodd-Frank Act preclusion of operating subsidiary preemption.
To implement the Act's changes to the preemption standards under the HOLA to conform to those applicable to national banks, we proposed adding new §§ 7.4010(a) and 34.6 to our regulations. The new sections provide that state laws apply to Federal savings associations and their subsidiaries to the same extent and in the same manner as those laws apply to national banks and their subsidiaries, respectively. The proposal also added § 7.4010(b) to similarly subject Federal savings associations and their subsidiaries to the same visitorial powers provisions in the Dodd-Frank Act that apply to national banks and their subsidiaries.
In addition, the proposal made conforming changes to the 2004 preemption rules at 12 CFR 7.4007 (concerning deposit-taking), 7.4008 (non-real estate lending), and 34.4 (real estate lending) to reflect the Act's provisions concerning preemption of state consumer financial laws. Those rules had provided that “state laws that obstruct, impair, or condition a national bank's ability to fully exercise its Federally authorized * * * powers are not applicable to national banks.” The proposal noted that, while the phrase “obstruct, impair or condition” had been drawn from and was intended to be consistent with the standards cited by the Supreme Court in Barnett, the terminology had resulted in misunderstanding and confusion. Accordingly, the proposal removed that phrase from these preemption rules. The proposal further clarified that a state law is not preempted to the extent that result is consistent with the Barnett decision. The proposal also deleted § 7.4009, which had provided only that “state laws that obstruct, impair, or condition a national bank's ability to fully exercise its powers to conduct activities under Federal law do not apply to national banks” without identifying any types of state laws that would be preempted.
Finally, the proposal made several changes to the OCC's visitorial powers regulation, 12 CFR 7.4000, to conform the regulations to the Supreme Court's decision in the Cuomo case as adopted by the Dodd-Frank Act. First, it added a reference to 12 U.S.C. 484 in the general rule, set forth § 7.4000(a)(1), that only the OCC may exercise visitorial powers with respect to national banks subject to certain exceptions. Second, to incorporate the Cuomo Court's recognition that nonjudicial investigations of national banksgenerally constitute an exercise of visitorial powers, the proposal revised the definition of “visitorial powers” in § 7.4000(a)(2)(iv) to clarify that those powers include “investigating or enforcing compliance with any applicable Federal or state laws concerning those activities.” Third, the proposal added a new paragraph (b) to provide that “[i]n accordance with the decision of the Supreme Court in Cuomo v. Clearing House Assn., L.L.C.,129 S. Ct. 2710 (2009), an action against a national bank in a court of appropriate jurisdiction brought by a state attorney general (or other chief law enforcement officer) to enforce a non-preempted state law against a national bank and to seek relief as authorized thereunder is not an exercise of visitorial powers under 12 U.S.C. 484.”
3. Comments on the Proposal ↑
○ Do not reflect the authority of state attorneys general to enforce compliance with certain Federal laws and regulations to be issued by the CFPB.
In addition, supporting commenters argued that a contrary position would also have negative consequences for national banks because it would eliminate legal certainty concerning which laws apply to their operations. These commenters asserted that consumer loans and deposit products are subject to comprehensive regulation, and preemption has served to provide clarity and certainty as to which regulatory requirements and standards apply to national banks. These commenters opined that preemption of multiple, differing, and sometimes conflicting, state and local laws and regulations is crucial to the ability of banks and thrifts to conduct multi-state operations in a safe and sound manner to the benefit of consumers, small businesses, and the United States economy as a whole. They voiced concern that the imposition of an overlay of potentially 50 state and an indeterminate number of local government rules on top of myriad Federal requirements would have a costly consequence that could materially affect banks and their ability to serve consumers efficiently and effectively across the nation and could deter future product innovation and modernized, more effective consumer disclosures.
These commenters cited studies showing that compliance with a multiplicity of state laws can increase costs for consumers and loan losses for banks and decrease credit availability. Some commenters also noted that uniform national laws, and the court and regulatory determinations pursuant to them, have been used in the past as a device to open markets, redress local protectionist measures, reduce the price of credit, increase the availability of credit, and increase the efficiency of banks.
Finally, commenters also disputed the contention that preemption encouraged lenders to engage in predatory lending practices that contributed to the subprime mortgage crisis. Somecommenters also suggested that the final rule include additional provisions to: clarify that the OCC's regulations concerning non-interest fees and charges (12 CFR 7.4002), adjustable rate mortgages (12 CFR 34.21) and debt cancellation contracts (12 CFR 37.1) remain in effect; revise, rather than eliminate, 12 CFR 7.4009 to conform with §§ 7.4007, 7.4008, and 34.4; clarify that the abrogation of 12 CFR 7.4006 will not be given retroactive effect,
confirm that the 2004 preemption rules will also apply to Federal savings associations, to the same extent that those rules apply to national banks; and confirm that all prior OTS preemption actions that are consistent with the holding in Barnett, including those based on the HOLA, also continue to be effective.
4. Discussion ↑
The OCC has carefully considered all of the points raised by all of the commenters. As described in detail in the next section and for the reasons next discussed, the OCC is issuing a final rule that is substantially the same as the proposal with additional instructive commentary and certain modifications to the visitorial powers provisions to address specific concerns that commenters raised and a clarifying change to §§ 7.4010(a) and 34.6 regarding the applicability of state law to Federal savings associations.
a. The Role of Preemption in the U.S. Banking System ↑
When Congress established the fundamental structure of the U.S. banking system i