Magazine article American Banker

OTS Preempts a Calif. Consumer Protection Law

Magazine article American Banker

OTS Preempts a Calif. Consumer Protection Law

Article excerpt


The Office of Thrift Supervision has ruled that a California consumer protection law does not apply to federal thrifts.

The March 10 decision, which surfaced last week, is important, industry experts say, because the agency is preempting a state law that does not relate directly to banking.

"I'm a little surprised to see the agency is being as aggressive as it is in its interpretation," said David W. Roderer, who is of counsel in the Washington office of the Goodwin, Procter & Hoar law firm.

Mr. Roderer said the OTS has routinely used its authority to preempt state banking laws that conflict with the federal thrift statute. But it rarely exempts federal thrifts from broad consumer protection laws that apply to beyond the banking industry, he said.

It was unclear whether California would contest the ruling. A spokeswoman for the state attorney general said she could not comment because she was unfamilar with the case.

Ronald Glancz, a partner in the Washington office of the Venable law firm, said the thrift agency should expect the decision to create a small uproar. Preemptions of state law are never popular, he observed.

Ellen C. Lamb, a spokeswoman for the Conference of State Bank Supervisors, questioned whether the agency's reach had gone beyond its grasp.

"We have been disturbed by cases where the OTS has preempted state consumer laws when it's really hard to see where the state laws interfere with home lending," she said.

Carolyn Buck, OTS chief counsel, acknowledged that it was unusual to preempt a consumer rights law that does not pertain to banking. …

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