New Bill Overturns Supreme Court Decision and will Require Subsidiaries to Comply with State Laws
Recent legislation approved by the House Financial Services Committee (the "Committee") proposed to overturn the U.S. Supreme Court's decision in Watters v. Wachovia
In addition, federal regulators would be required to make a written finding that the state law "prevents or significantly interferes" with the federal institution's powers and would require that federal regulators cooperate with the CFPA. The two federal regulators would need to agree that consumers would still be protected against abusive practices if the preemption is allowed. Furthermore, the Committee has created new language to ensure an increase in coordination between regulators. For example, the Federal Trade Commission is required to give the CFPA Director 30 days written notice before they engage in any enforcement action in which they have overlapping authority over a state law. Federal banking agencies will also be required to share consumer complaint data with the CFPA and an Office of Financial Literacy will be created to provide consumer education on financial services and products.
The Committee also states that community banks with less than $10 billion in assets and credit unions with less than $1.5 billion in assets will be exempt from CFPA examinations. However, they will be required to abide by CFPA regulations. In the case that the CFPA becomes a back-up regulator, the agency has the power to remain present during the primary regulator examinations, engage in enforcement actions on a case-by-case basis, and if necessary remove the primary regulator if the regulator does not examine the institution adequately.
Lastly, H.B. 3126 provides state regulators the right to sue national banks when they are believed to be in violation of state consumer protection laws.