In examining the rules governing federal preemption, the Fourth Circuit noted that, while the NBA itself does not expressly preempt state law, the OCC's regulations carve out areas of state law that are expressly preempted, but also set forth particular subject categories that states may regulate pursuant to the Savings Clause. In so doing, the Court pointed out the regulations' distinction between a national bank's collection activities and a bank's extension of credit, and that the Savings Clause specifically lists "rights to collect debts" (which the Court treated as "debt collection" generally) as a category of state law not preempted by federal law.
Accordingly, the Fourth Circuit determined that under the Savings Clause, the Bank's activity in repossessing and selling the Plaintiff's car was subject to the state notice requirements, because the CLEC did not impermissibly interfere with the Bank's federal power to extend credit, and "the degree to which the CLEC regulate[d] an enumerated power of a national bank [was] merely incidental."
The Fourth Circuit also observed that the OCC's own interpretation of the Savings Clause supported its conclusion that the CLEC was not preempted, because the CLEC, as an "undiscriminating law of general applicability," did not treat national banks differently from other bank- or non-bank lenders in Maryland.
As to the Plaintiff's breach of contract claim, the Fourth Circuit disagreed with the district court's analysis that because the Bank had not negotiated the terms of the loan agreement it purchased from the original lender, the Bank was not bound by the CLEC provision in the contract. Noting that the original lender had expressly elected to apply the CLEC to the loan, in part because it allowed the lender to charge a higher late fee, the Court reasoned that, as the voluntary assignee of the debt, the Bank was obligated to adhere to the terms of the loan contract, including the CLEC notice requirements.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates are available on the internet, in searchable format, at: