Senator Chris Dodd’s decision to retire from politics has caused many to conclude that he will not have sufficient clout to assure the creation of a Consumer Financial Protection Agency. That may be. Or perhaps as Roll Call suggested, Senator Dodd might have agreed to step aside in exchange for a promise that he be the first person to head the new agency. Who knows? Perhaps it does not matter. Dramatic change is on the way, and nothing is likely to stop it.
Whether we get a CFPA or not, one shield for national banks is melting away. The preemption defense is dying a slow death. Just a little over one year ago, national banks could count on federal regulators to stand by their side to defend against attacks from state attorneys general. In 2004, the OCC had issued a rule establishing areas of state law that do not apply to national bank lending and deposit-taking activities. It also confirmed that the OCC as the exclusive supervisory authority for national bank activities. Click here for the regulation. According to the OCC, if a state AG claimed a bank was violating its state law, it was the OCC and no one else which had the power to enforce the law against the bank. The state AG’s office could not ask for information, it could not compel testimony, it could not require licenses, and it could not enforce even its own state laws against a national bank.