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1.5.7 OCC Preemption of State Laws Governing Electronic Services

Like the OCC regulation authorizing bank fees, the OCC regulation authorizing banks to furnish products and services by electronic means179 does not categorically preempt state laws.180 The regulation provides:

As a general rule, and except as provided by Federal law, State law is not applicable to a national bank’s conduct of an authorized activity through electronic means or facilities if the State law, as applied to the activity, would be preempted pursuant to traditional principles of Federal preemption derived from the Supremacy Clause of the U.S. Constitution and applicable judicial precedent. Accordingly, State laws that stand as an obstacle to the ability of national banks to exercise uniformly their Federally authorized powers through electronic means or facilities, are not applicable to national banks.181

The OCC did not revise this regulation following passage of the Dodd-Frank Act.

The first sentence of the preemption provision is a truism and likely consistent with the Dodd-Frank standard. But the second sentence exceeds the OCC’s powers under the National Bank Act, as amended by the Dodd-Frank Act, to the extent that it implies preemption of state laws on the basis that they are not uniform or that they impose an obstacle that does not rise to the level of the Barnett Bank “prevent or significantly interfere” standard.182

Applying Barnett Bank standards, a court held that federal law preempted a state law that prohibited entities other than national banks from using a national bank’s electronic payment processing services unless the national bank obtained state approval.183 The court held that this law significantly interfered with the national bank’s provision of these services.

Footnotes

  • 179 {169} 12 C.F.R. § 7.5002. Among other activities, the regulation authorizes national banks to provide electronic communications services, electronic bill presentment services, electronic stored value systems, and electronic letters of credit.

  • 180 {170} See Mwantembe v. TD Bank, 669 F. Supp. 2d 545 (E.D. Pa. 2009) (“The fact that the OCC’s regulations have touched on the area of gift cards does not mean that any state law affecting a national bank’s practice of issuing gift cards is preempted.”).

  • 181 {171} 12 C.F.R. § 7.5002(c).

  • 182 {172} Barnett Bank of Marion Cty. v. Nelson, 517 U.S. 25, 116 S. Ct. 1103, 134 L. Ed. 2d 237 (1996). See § 1.5.2, supra.

  • 183 {173} U.S. Bank v. Schipper, 812 F. Supp. 2d 963 (S.D. Iowa 2011).