Although various stakeholders have an important role in the COVID-19 response, the OCC is concerned that competing requirements could conflict with the ability of banks to operate effectively, soundly.
While recognizing the important role of, and the many relief efforts taken by, "a wide range of stakeholders," including state and local governments, in response to the "economic disruption caused by the spread of COVID-19," the Office of the Comptroller of the Currency is reminding all stakeholders that national banks, federal savings associations, and federal branches and agencies of foreign banks, are "governed primarily by uniform federal standards." In its June 17, 2020, bulletin (OCC Bulletin 2020-62), titled "COVID-19 Relief Programs: Preemption," the OCC communicates its concern that although state and local actions are "well-intended," they may result in a "proliferation of a multitude of competing requirements" that will "conflict with banks’ ability to operate effectively and efficiently, potentially increasing the risk to banks’ safety and soundness and ultimately harming consumers."
In reminding stakeholders that banks supervised by the OCC "generally are not subject to state law limitations," the OCC bulletin notes that:
- while the specifics of each state or local action vary, many of them address "foreclosure and repossession moratoriums, loan forbearance, and limitations on the interest and fees banks may charge";
- these state and local actions also may require banks to report information to state or local officials and may include penalties for applicable violations;
- federal law preempts state and local laws that "impermissibly conflict with banks’ exercise of federally authorized powers under the standard set forth in Barnett Bank of Marion County, N.A. v. Nelson";
- OCC regulations "provide examples of the types of state laws that do not apply to banks’ lending and deposit-taking activities," and attention should be given to "state law limitations on: terms of credit, such as the schedule for repayment and interest, amortization of loans, balance, payments due, minimum payments, and term to maturity; disbursements and repayments; and processing, origination, and servicing mortgages";
- OCC regulations preempt state laws that conflict with the real estate lending powers of federally chartered banks and specifically preempt state laws that interfere with banks’ ability to make mortgage loans secured by real estate;
- because the OCC has "exclusive visitorial authority" with respect to banks, requirements to report to state and local officials "generally run afoul of this exclusive authority";
- banks should consult with counsel to determine the applicability of any state or local law, and banks and their counsel may contact the OCC with questions;
- in keeping with federal preemption principles, states and localities are encouraged to explicitly exempt federally chartered banks from their laws; and
- states and localities may "reach out to the OCC with any concerns."
MainStory: TopStory BankingOperations CommunityDevelopment Covid19 FinancialStability Preemption StateBankingLaws
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