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Attorney General Peter Kilmartin and Attorneys General Respond to OCC Proposed Financial Reform Regulations

Citing concerns about preemption of state law and the exercise of state enforcement powers, Attorney General Peter F. Kilmartin and the National Association of Attorneys General (NAAG) sent comments yesterday signed by Attorney General Kilmartin and 47 other state and territorial Attorneys General to the Office of the Comptroller of the Currency (OCC) over proposed regulations implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“The States are often in the best place to identify and address violations of their consumers’ rights and federal agencies should support and encourage those efforts,” said Peter F. Kilmartin. “We all agree it’s important that the federal government oversee national banks and regulate their financial transactions, but it’s also important that states retain authority to protect their citizens, especially when federal law does not in any way interfere with that right. Any rules the OCC enacts to enforce federal law must recognize that Congress did not take away all the states’ power to oversee banks and that we will best protect our citizens if we work together.” “Unfortunately, the OCC’s current proposal maintains the very same preemption rules that were rejected by Congress in Dodd-Frank and by the Supreme Court in Cuomo v. Clearing House Assn., L.L.C., 129 S. Ct. 2710 (2000). The OCC has not complied with the Congressional directive to thoroughly review its relationship with state law on a case-by-case basis, in light of the Supreme Court’s decision in Barnett Bank v. Nelson, 517 U.S. 25 (1996), and the statutory language of Dodd-Frank. In our view, the OCC should demonstrate its compliance by withdrawing its preemption regulations completely,” the letter stated.

“To comply with the new statutory directives on the preemption of state law, the OCC must review state financial laws on a case-by-case basis to determine whether those laws prevent or significantly interfere with national bank powers. The OCC should not rely on its former general preemption pronouncements, which were based on an improper standard and have been rejected by Congress. With respect to enforcement, we believe that state and federal regulators should work together and share their respective authority to protect consumers and to ensure a fair financial marketplace,” the comments conclude.

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