Trust Updates Archive

Federal Preemption
Court Ruling Paves Way for Future Litigation against Banks

(Chicago, February 18, 2003)--Interpretive letters from the OCC that preempt state banking and insurance laws are nonbinding and do not carry "the force of law," according to U.S. Court of Appeals for the First Circuit.

Based on that finding, the court on February 13 dismissed the Commonwealth of Massachusetts challenge to an OCC interpretive letter which concluded that federal law preempted certain Massachusetts statutes regulating the sale of insurance by banks. The OCC contended in its court filings that its interpretive letters were "informal agency guidances" and leave states free to enforce their own laws. The First Circuit found that no "regulatory conflict" existed for the court to resolve. Further, the court found that it would be more practical, for the resolution of preemption questions, for the states to sue banks that justify interstate expansion on the basis of OCC interpretation of federal law.

In November 2002, the Fourth Circuit Court of Appeals, in a split decision, issued a similar ruling regarding West Virginia's challenge of an OCC interpretive letter.

The rulings heighten the risk to banks relying on OCC letters. States are now expected to focus their attention on banks relying on OCC interpretive letters, rather than trying to stop the OCC from issuing them.

Bowler v. Hawke, 02-1738 (filed June 19, 2002)

-- Copyright ©2003 A.M. Publishing, Inc., Trust Regulatory News

No statement in this issue is offered as or
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For more information see the February 2003*
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