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Senate Passes Federal Preemption Amendment

The Senate voted in favor of a proposed amendment to financial services reform legislation that would enable federal regulators to pre-empt state laws, as well...
May 26, 2010

The Senate voted in favor of a proposed amendment to financial services reform legislation that would enable federal regulators to pre-empt state laws, as well as state attorneys general to enforce laws over the banking industry.

Under the bill, the Office of the Comptroller of the Currency (OCC) would be allowed to follow the so-called Barnett standard to preempt state laws on a case-by-case basis. But banking industry representatives objected to the provision because it would also require the agency to take additional steps, including proving that the issue a state law is addressing is already being handled by a substantial federal standard.

While advocates of state regulation described the amendment as a fair compromise that recognizes the role of the states, banking interests were not pleased. They said that state AGs would have much more power to pursue national banks than under current law. An analyst said eventually the new amendment would give the state attorney generals the ability to enforce almost any consumer protection rule against national banks.

Senate Strikes Deal on Preemption Provision (Insurance Networking News 5/18/10)