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Consumer Banking and Payments Law: [Section 19. Interoperability.]

[The [governmental agency] [designated officer] of this State which adopts standards pursuant to Section 18 may encourage and promote consistency and interoperability with similar requirements adopted by other governmental agencies of this and other States and the federal government and nongovernmental persons interacting with governmental agencies of this State.

Consumer Banking and Payments Law: Section 20. Severability Clause.

If any provision of this [Act] or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this [Act] which can be given effect without the invalid provision or application, and to this end the provisions of this [Act] are severable.

Consumer Credit Regulation: 3.1.1 Overview

The “normal” operation of state law is that when a consumer enters into a transaction, the transaction must comply with the law of the state where the transaction took place. But there is nothing normal about the operation of state credit statutes, particularly where a loan is originated by a depository institution, such as a bank, savings association, or credit union.

Consumer Credit Regulation: 3.1.2.3 Banks and Savings Associations

Different rules apply to federally chartered vs. state-chartered banks and savings associations. The United States banking system consists of two parallel tracks for depository institutions—those that operate under federal charters and are federally regulated and those that operate under state charters and are primarily state regulated. Those with state charters can opt for certain forms of federal regulation and preemption of state law by opting for federal insurance of their deposits.18

Consumer Credit Regulation: 3.1.2.4 Credit Unions

Credit unions are depository institutions. Federal credit unions have federal charters and are regulated by the National Credit Union Association (NCUA). State credit unions have state charters and are subject to state banking supervision. If they are federally insured, it is through the National Credit Union Share Insurance Fund, administered by the NCUA. The NCUA has some regulatory control over state-chartered credit unions through their participation in the insurance fund.

Mortgage Lending: 5.11.2 Remedies for Violation of Duty of Good Faith

As the duty of good faith is an implied contract term, most jurisdictions allow a contract claim for violation of this duty.509 Tort liability may require a showing of some special relationship, beyond that of lender and customer, such as special circumstances giving rise to a fiduciary or quasi-fiduciary relationship or other indicia of a heightened duty.510

Consumer Credit Regulation: 3.1.2.5 Industrial Loan Companies

The federal Bank Holding Company Act (BHC Act) has established a general separation of banking and commerce by prohibiting commercial firms, such as companies engaged in industrial, retail, and information technology businesses, from owning FDIC-insured “banks.”28 However, the BHC Act exempts an industrial loan company (ILC) from the definition of “bank,” permitting a commercial firm to own an ILC, provided the ILC satisfies two criteria.29

Consumer Credit Regulation: 3.1.2.6 Operating vs. Financial National Bank Subsidiaries

National banks can have “operating” subsidiaries and “financial” subsidiaries, and different rules apply to one versus the other. Operating subsidiaries are those that can engage solely in activities that national banks are permitted to engage in directly. Subsidiaries that can engage in other activities are financial subsidiaries.

Consumer Credit Regulation: 3.2.1 Scope of This Section

Under the Supreme Court’s decision Barnett Bank v. Nelson, state law is preempted to the extent that it prevents or significantly interferes with a national bank’s exercise of its powers.43 This is a conflict preemption standard and is distinct from a national bank’s right to export its home state’s interest rate, which is discussed in § 3.5, infra.

Mortgage Lending: 3.1 The Client Interview

The client interview is extremely important. It defines the scope of the lawyer’s representation, forms the basis of the legal claims, and reveals the client’s goals. Even though mortgage litigation is complex and often involves many different laws, practitioners must avoid becoming so ensnared in the complexities of the law that they fail to focus on the facts. The borrower’s story will feature prominently in a winning case. And the success of the case will be at risk if the client’s lawyer cannot present a compelling story.

Consumer Credit Regulation: 3.2.2.1 General

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 201049 made sweeping changes in the authority of federal banking regulators to preempt state law. These changes apply to both national banks and federal savings associations.50

Consumer Credit Regulation: 3.2.2.3 No Field Preemption

The Dodd-Frank Act provides that neither the National Bank Act nor the Home Owners Loan Act “occup[ies] the field in any area of State law.”77 Unlike the OTS,78 the Office of the Comptroller of the Currency never explicitly purported to occupy the field of lending regulation for national banks.79 But the OCC regulations themselves amounted to virtual field preemption by claiming to preempt all state laws governing lending, deposit taking, and other areas

Mortgage Lending: 5.5 Home Improvement Credit

About half the states have enacted home improvement statutes, requiring licensing or registration of home improvement contractors and, to some extent, regulating their conduct.165 Many of these statutes mandate that the contractor be bonded or obtain insurance, or create a compensation fund.

Consumer Credit Regulation: 3.2.2.4 No Preemption of State Laws That Parallel Federal Requirements

Since the Barnett Bank standard is a conflict preemption standard, it only preempts state laws that conflict with federal banking laws. State laws that parallel federal requirements do not conflict with those requirements and thus are not preempted.83

This is a significant principle because many important state protections are based on or echoed by federal law. For example, this principle should preserve:

Consumer Credit Regulation: 3.2.2.5 Case-by-Case Preemption Determinations; Procedures

The Dodd-Frank Act requires that OCC regulations preempting state consumer financial laws determine, on a case-by-case basis, that a particular state law, or one with substantially equivalent terms, meets the Barnett Bank standard.96 This requirement means that the OCC cannot preempt broad categories of state laws, but can only preempt a “particular” state law that “prevents or significantly interferes” with a bank power.

Consumer Banking and Payments Law: Introductory Materials

12 U.S.C. §§ 4301–4311; Pub. L. No. 102-242, 105 Stat. 2334–2342 (Dec. 19, 1991), Pub. L. No. 102-242, 105 Stat. 2339 (Dec. 12, 1991), as amended by Pub. L. No. 102-550, 106 Stat. 3896, 3897, 4084 (Oct. 28, 1992); Pub. L. No. 103-325, 108 Stat. 2232 (Sept. 23, 1994); Pub. L. No. 104-208, 110 Stat. 3009–471 (Sept. 30, 1996); Pub. L. No. 111-203, § 1100H, 124 Stat. 1376, 2113 (July 21, 2010); 75 Fed. Reg. 57,252 (Sept. 20, 2010).

Consumer Banking and Payments Law: 12 U.S.C. § 4301. Findings and purpose [§ 262]

(a) Findings

The Congress hereby finds that economic stability would be enhanced, competition between depository institutions would be improved, and the ability of the consumer to make informed decisions regarding deposit accounts, and to verify accounts, would be strengthened if there was uniformity in the disclosure of terms and conditions on which interest is paid and fees are assessed in connection with such accounts.

(b) Purpose