Final Rule to Implement Dodd-Frank Provisions Approved by Bank Regulator

Final Rule to Implement Dodd-Frank Provisions Approved by Bank Regulator



The Office of the Comptroller of the Currency, the agency that watches over national banks, on Wednesday has finalized a rule to implement Dodd-Frank law directives on when federal law would be able to override state consumer-protection laws. Although the banking industry has lauded the rule, consumer groups, on the other hand, says that it failed to live up to the objectives of Dodd-Frank.

The final rule revises a draft that has been proposed in May and comes one day before it is mandated to take effect under the Dodd-Frank law, which was passed a year ago Thursday.

In a press release, the regulator said that the changes are in part designed to get rid of the ambiguity regarding “preemption” standards. They eliminate, specifically, excessively broad language from rules which say state laws that “obstruct, impair, or condition” the powers of a national bank are preempted.

However, Lauren Saunders, the National Consumer Law Center managing attorney, said that the OCC persists in “distorting” the complex legal standard it utilizes in determining when do federal law trump state regulation.

She said that the regulator declined to include the Dodd-Frank language which stipulates preemption only applies when the activity at issue “prevents or significantly interferes with the exercise of bank power.” Saunders also said, “The OCC has long thumbed its nose at state efforts to protect consumers from abusive banking practices.”

The American Bankers Association, meanwhile, welcomed the finalized rule.

Kenneth Clayton, the industry group chief legal counsel, said, “Today, the OCC clarified the rules of the road for national banks and how they serve their customers. This means that bank customers–regardless of where they live or work–will have a consistent, high-level set of consumer protections nationwide.”