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1.5.9 NBA and OCC Preemption of Visitorial Activities

Some states and cities have considered using their own contracting powers to impose conditions on the financial institutions with which they do business. While in general state and local governments can set the terms of their own contracts and choose what institutions receive those contracts, preemption issues could arise if the contracting process is viewed as a broader attempt to regulate national banks or federal savings associations.

The National Bank Act provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law.”188 The OCC has defined “visitorial” powers to include (i) examination of a bank; (ii) inspection of a bank’s books and records; (iii) regulation and supervision of activities authorized or permitted pursuant to federal banking law; and (iv) enforcing compliance with any applicable federal or state laws concerning those activities.189

One court struck down a responsible banking ordinance adopted in New York City that required a needs assessment of banks eligible to hold the city’s deposits to determine whether the banks were serving the needs of low-income neighborhoods and other potentially vulnerable communities.190 Issues of inquiry included the use of credit reporting to screen bank account applicants and the fees charged to low-income residents. The court held that the ordinance was an impermissible attempt to regulate national banks and to exercise visitorial powers over them rather than a propriety effort aimed at obtaining cheaper or more efficient services for the city.

Footnotes

  • 188 {178} 12 U.S.C. § 484(a).

  • 189 {179} 12 C.F.R. § 7.4000. Visitorial powers are discussed in National Consumer Law Center, Mortgage Lending § 5.9 (3d ed. 2019), updated at www.nclc.org/library.

  • 190 {180} N.Y. Bankers Ass’n v. City of New York, 119 F. Supp. 3d 158 (S.D.N.Y. 2015).