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Consumer Banking and Payments Law: 1.5.1 Overview

Federal banking law or regulations may preempt the application of state law to products or services offered by banks and credit unions. The law of preemption is summarized only briefly here as it relates to deposit taking and payments activities. It is addressed in detail in two other treatises in this series:

Consumer Banking and Payments Law: 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.

Consumer Banking and Payments Law: 1.5.10.2.1 Introduction

Courts have generally held that the National Bank Act and the OCC regulations do not preempt a challenge to a bank’s deception regarding overdraft fees. They have generally reached the same conclusion regarding a bank’s manipulation of the order of posting charges and deposits in order to maximize overdraft fees, especially if deception is involved.201 Courts often contrast these claims with claims that challenge the amount of the fee or the bank’s right to impose it.

Consumer Banking and Payments Law: 1.5.11.1 Gift Card Inactivity Fees and Expiration Dates

Courts have split over challenges to gift card expiration dates and inactivity fees, some finding the claims preempted,237 others rejecting preemption challenges.238 Some of these decisions deal with the question of whether state law is preempted as to a non-bank entity that sells a gift card that has some connection with a bank—an issue mooted by the Dodd-Frank Act amendments that limit preemption to banks themselves, not to agents of banks.239 Mo

Consumer Banking and Payments Law: 1.5.13 Federal Credit Union Act Preemption of State Law

The National Credit Union Administration (NCUA) has been less aggressive than the OCC and the OTS in preempting state laws. Nonetheless, the Federal Credit Union Act (FCUA) and NCUA regulations under it preempt some state laws governing deposit accounts. The Dodd-Frank Act did not revise the preemption standard governing the FCUA, but the same Barnett Bank preemption standard should apply to state laws that apply to federal credit unions.259

Mortgage Servicing and Loan Modifications: 19(g)(1) Creditor to provide special information booklet.

1. Revision of booklet. The Bureau may, from time to time, issue revised or alternative versions of the special information booklet that addresses transactions subject to § 1026.19(g) by publishing a notice in the Federal Register. The Bureau also may choose to permit the forms or booklets of other Federal agencies to be used by creditors. In such an event, the availability of the booklet or alternate materials for these transactions will be set forth in a notice in the Federal Register.

Mortgage Servicing and Loan Modifications: 19(g)(2) Permissible changes.

1. Reproduction. The special information booklet may be reproduced in any form, provided that no changes are made, except as otherwise provided under § 1026.19(g)(2). See also comment 19(g)(2)–3. Provision of the special information booklet as a part of a larger document does not satisfy the requirements of § 1026.19(g). Any color, size and quality of paper, type of print, and method of reproduction may be used so long as the booklet is clearly legible.

Mortgage Servicing and Loan Modifications: 20(a) Refinancings

1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties’ contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer’s behalf, or the rescheduling of payments under an existing obligation.

Mortgage Servicing and Loan Modifications: 20(b) Assumptions

1. General definition.

i. An assumption as defined in § 1026.20(b) is a new transaction and new disclosures must be made to the subsequent consumer. An assumption under the regulation requires the following three elements:

A. A residential mortgage transaction.

B. An express acceptance of the subsequent consumer by the creditor.

C. A written agreement.

Mortgage Servicing and Loan Modifications: 20(c) Rate adjustments with a corresponding change in payment.

1. Creditors, assignees, and servicers. Creditors, assignees, and servicers that own either the applicable adjustable-rate mortgage or the applicable mortgage servicing rights or both are subject to the requirements of § 1026.20(c). Creditors, assignees, and servicers are also subject to the requirements of any provision of subpart C that governs § 1026.20(c). For example, the form requirements of § 1026.17(a) apply to § 1026.20(c) disclosures and thus, assignees and servicers, as well as creditors, are subject to those requirements.

Mortgage Servicing and Loan Modifications: 20(d) Initial rate adjustment.

1. Creditors, assignees, and servicers. Creditors, assignees, and servicers that own either the applicable adjustable-rate mortgage or the applicable mortgage servicing rights or both are subject to the requirements of § 1026.20(d). Creditors, assignees, and servicers are also subject to the requirements of any provision of subpart C that governs § 1026.20(d). For example, the form requirements of § 1026.17(a) apply to § 1026.20(d) disclosures and thus, assignees and servicers, as well as creditors, are subject to those requirements.

Mortgage Servicing and Loan Modifications: 20(e)(1) Scope.

1. Real property or dwelling. For purposes of § 1026.20(e)(1), the term “real property” includes vacant and unimproved land. The term “dwelling” includes vacation and second homes and mobile homes, boats, and trailers used as residences. See § 1026.2(a)(19) and related commentary for additional guidance regarding the term “dwelling.”