Role of the Office of Thrift Supervision and Office of the Comptroller of the Currency in the Preemption of State Law

GGD/OGC-00-51R: Feb 7, 2000

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Pursuant to a congressional request, GAO provided information on the Office of Thrift Supervision's (OTS) and the Office of the Comptroller of the Currency's (OCC) role in the preemption of state law, focusing: (1) OTS' and OCC's authorities and processes for using preemption opinions and regulations; (2) how the Alternative Mortgage Transaction Parity Act of 1982 preempts state law and the views of selected state officials on its effect; and (3) OTS' and OCC's disclosure procedures for communicating their preemption opinions to federally chartered financial institutions and affected states and the views of selected state officials on these procedures.

GAO noted that: (1) the statute underlying OTS' preemption determinations is the Home Owners' Loan Act (HOLA), which authorizes OTS to provide for the organization, incorporation, examination, and regulation of federal savings associations; (2) finding that this authority "occupies the field" of regulation affecting the operation of federal savings associations, OTS and its predecessor agency have issued broad regulations to describe its preemption of state law in certain areas; (3) in addition, OTS has issued advisory opinions that consider whether, based on the HOLA and OTS regulations, state law is preempted; (4) OCC issues opinions considering whether state law is preempted under the National Bank Act, which provides for the creation, regulation, and operation of national banks and enumerates national bank powers; (5) in rendering their opinions on whether particular state laws are preempted, OTS generally relies on field preemption, although its analysis also typically addresses whether there is a conflict between federal and state law, and OCC generally relies on conflict preemption; (6) the Parity Act preempts state laws covering alternative mortgage financing arrangements, such as variable interest-rate loans and loans requiring balloon payments; (7) its purpose was to eliminate any discriminatory impact that federal regulations had on nonfederally chartered housing creditors; (8) officials GAO interviewed from selected state banking departments said that some consumers do not benefit from their states' more restrictive consumer protection laws because of the Parity Act; (9) OTS has issued broad regulations preempting state laws in certain areas and OCC has not; (10) in connection with the issuance of these regulations, OTS seeks public comment from affected parties, through the publication of the proposed rule in the Federal Register; (11) when OTS and OCC render their opinions on whether or not a particular state law is preempted, both agencies publish their preemption opinions on their Internet web sites and provide their opinions directly to the parties who originally requested the rulings; (12) OCC also reports its preemption opinions in publications available to state officials and others; (13) OCC is subject to two notice requirements under the Riegle-Neal Act that do not apply to OTS; (14) OCC must provide a public notice and comment period if preemption opinions apply to certain types of state laws such as in the area of consumer protection; and (15) OCC must report annually to Congress on its preemption opinions.