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Federal judge rules against state regulators on national bank pre-emption

Mark WarnerState regulators lost their claim against U.S. Bank that the Dodd-Frank Act “raised the standard” for national bank pre-emption.

The U.S. District Court for the Southern District of Iowa ruled that the National Bank Act and OCC regulations pre-empt Iowa payment processing rules and that Dodd-Frank made no material changes to those regulations, ABA.com reports.

U.S. Bank argued that the National Bank Act and OCC regulations allowed them to operate under an Iowa law that let them provide state approved and regulated “central routing units” to state banks to authorize ATM transactions with ATM units not owned or operated by the bank.

According to U.S. Bank, Iowa regulators impermissibly interfere with their authority to provide such services.

U.S. District Court Judge James Gritzner dismissed the state regulators’ argument. In a footnote, he said that the Dodd-Frank Act, “did not materially alter the standard for pre-emption that the court must apply in this case,” ABA.com reports.

This ruling is the second federal decision to hold that the Dodd-Frank Act does not have a substantial effect on federal pre-emption.

In a letter to the Treasury Department in July, Sens. Tom Carper (D-Del.) and Mark Warner (D-Va.) wrote that the ambiguity of Dodd-Frank’s preemption standard would “lead to years of litigation before the new standard was finalized in a way that enabled national banks (and state banks chartered by state with wild card statutes) to plan and deliver products and services without significant legal risk.”

“Products and services offered nationally could literally be subject to hundreds of differing state and local laws,” the senators wrote. “This uncertainty would clearly increase the cost and decrease the availability of bank services, including lending, at a time of economic difficulty when we can least afford it.”

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