Opinion ID: 2526643
Heading Depth: 1
Heading Rank: 3

Heading: Federal Preemption under HOLA

Text: To carry out its broad[ ] mandate under HOLA with respect to the lending practices of FSAs, OTS promulgated regulations governing the powers and operations of every Federal savings and loan association from its cradle to its corporate grave, and regulate[d] comprehensively the operations of these associations, including their lending practices and, specifically, the terms of loan instruments ( De la Cuesta, 458 US at 145, 161, 167 [internal quotation marks omitted]). In 12 CFR 560.2 (a), entitled Occupation of field, OTS expressed its preemptive intent in the clearest possible terms: OTS is authorized to promulgate regulations that preempt state laws affecting the operations of [FSAs] . . . OTS hereby occupies the entire field of lending regulation for [FSAs]. OTS intends to give [FSAs] maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, [FSAs] may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section. . . For purposes of this section, `state law' includes any state statute, regulation, ruling, order or judicial decision (12 CFR 560.2 [a]). OTS then sets out 13 [i]llustrative examples of the types of state laws preempted by [12 CFR 560.2 (a)], without limitation. As relevant to this discussion, these examples include state laws purporting to impose requirements regarding: (5) Loan-related fees (9) Disclosure and advertising . . . [and] (10) Processing, origination, servicing . . . [of] mortgages (12 CFR 560.2 [b]). Immediately following the nonexclusive list of types of preempted laws, the regulation identifies types of state laws that are not preempted to the extent that they only incidentally affect the lending operations of [FSAs] or are otherwise consistent with the purposes of paragraph (a) of this section (12 CFR 560.2 [c]). These laws include (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section (12 CFR 560.2 [c]). OTS adopted 12 CFR 560.2 in 1996 to express its longstanding position . . . on the federal preemption of state laws affecting the lending activities of federal savings associations, meant to confirm and carry forward its existing preemption position (OTS, Final Rule, 61 Fed Reg 50951, 50965 [1996]). Stated another way, OTS explained that [b]ecause lending lies at the heart of the business of a federal thrift, OTS and its predecessor . . . have long taken the position that the federal lending laws and regulations occupy the entire field of lending regulation for [FSAs], leaving no room for state regulation. For these purposes, the field of lending regulation has been defined to encompass all laws affecting lending by federal thrifts, except certain specified areas such as basic real property, contract, commercial, tort, and criminal law  ( id. [emphasis added]). OTS then provided the courts with an interpretive framework for 12 CFR 560.2, as follows: When confronted with interpretive questions under § 560.2, we anticipate that courts will, in accordance with well established principles of regulatory construction, look to the regulatory history of § 560.2 for guidance. In this regard, OTS wishes to make clear that the purpose of paragraph (c) is to preserve the traditional infrastructure of basic state laws that undergird commercial transactions, not to open the door to state regulation of lending by [FSAs]. When analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption  ( id. at 50966-50967 [emphasis added]).