Preemption Determination

DEPARTMENT OF THE TREASURY

[Docket No. 96-01]

Preemption Determination

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice and request for comments.

-----------------------------------------------------------------------

SUMMARY: The Office of the Comptroller of the Currency (OCC) is

publishing for comment a written request for OCC reconsideration of its

prior determination that Federal law preempts the application of a New

Jersey law that requires all depositories in the State which offer

regular checking accounts to offer low-cost or consumer checking

accounts. It is intended to provide interested persons with an

opportunity to provide comments on the preemption request prior to the

OCC's issuance of a final opinion letter responding to the request.

DATES: Comments should be submitted on or before April 8, 1996.

ADDRESSES: Comments should be sent to the Communications Division, 250

E Street, SW., Third Floor, Washington, DC 20219. Attention: Docket No.

96-01. Comments will be available for inspection and photocopying at

the same location. Appointments for inspection of comments can be made

by calling (202) 874-4700. In addition, comments may be sent by

facsimile transmission to FAX number 202-874-5274 or by electronic mail

to [email protected]

FOR FURTHER INFORMATION CONTACT: Susan L. Blankenheimer, Senior

Attorney, Bank Activities and Structure Division (202) 874-5300.

SUPPLEMENTARY INFORMATION:

Background

Section 114 of the Riegle-Neal Interstate Banking and Branching

Efficiency Act of 1994 (section 114), Pub. L. 103-328 (12 U.S.C. 43),

generally requires the OCC to publish in the Federal Register a

descriptive notice of certain requests that the OCC receives for

preemption determinations. The OCC must publish this notice before it

issues any opinion letter or interpretive rule concluding that Federal

law preempts the application to a national bank of a State law in the

areas of community reinvestment, consumer protection, fair lending, or

the establishment of intrastate branches (the four designated areas).

The OCC must give interested persons at least 30 days to submit written

comments, and must consider the comments in developing the final

opinion letter or interpretive rule. The OCC must publish in the

Federal Register any final opinion letter or interpretive rule that

concludes that Federal law preempts State law in any one of the four

designated areas.

Section 114 also provides certain exceptions to the Federal

Register publication requirement, however. Notice or comment is not

required where the opinion letter or interpretive rule: (1) addresses

an issue essentially identical to one previously resolved by the courts

or on which the agency has previously issued an opinion letter or

interpretive rule; (2) responds to a request that contains no

significant legal basis on which to make a preemption determination; or

(3) is prepared for use in judicial proceedings, by Congress, or for

intragovernmental use.

While it is not clear that the standards of section 114 require

that the OCC apply the section 114 notice procedures to this request

for reconsideration, the OCC has elected to do so because of the

concern raised during Congressional consideration of the Riegle-Neal

Interstate Banking and Branching Efficiency Act of 1994 about the

particular OCC preemption opinion at issue. See H.R. CONF. REP. NO.

103-651, 103d Cong., 2d Sess. 53-54 (1994).

Specific Request for OCC Preemption Determination

On November 13, 1995, the State of New Jersey Department of Banking

(Department) requested that the OCC reconsider whether New Jersey's

Consumer Checking Account Act (NJCCAA), codified at N.J.Stat. Ann.

section 17:16N-1 et seq., is preempted by Federal law. In a 1992 letter

to the Department, the OCC concluded that the NJCCAA and its

implementing regulation, N.J. Admin. Code section 3:1-19.4, are

preempted by Federal law and that national banks doing business in New

Jersey are not required to comply with any of the provisions of the

NJCCAA or its implementing regulation. See Interpretive Letter No. 572

(January 15, 1992), reprinted in [1991-1992 Transfer Binder] Fed.

Banking L. Rep. (CCH) para. 83,342.

The NJCCAA requires every depository institution that maintains

regular checking accounts in New Jersey to make available to consumers

a New Jersey Consumer Checking Account at all offices of that

institution where regular checking accounts are offered or available.

N.J. Stat. Ann. section 17:16N-3.a.1 The NJCCAA does not require a

depository institution to offer a New Jersey Consumer Checking Account

at a cost below its actual cost of providing the account. The NJCCAA's

implementing regulation sets forth procedures for closing or refusing

to open a New Jersey Consumer Checking Account if a depository

institution's fees and revenues derived from the account are less than

its costs. N.J. Admin. Code section 3:1-19.4.

1 The term depository institution is defined to include

national banks doing business in New Jersey. Id. at section 2.

---------------------------------------------------------------------------

The principal features of a New Jersey Consumer Checking Account,

as set forth in the regulation (N.J. Admin. Code Sec. 3:1-19.2(a)),

include the following:

1. The initial deposit amount necessary to open the account is

$50.00 and the minimum balance necessary to maintain the account is

$1.00;

2. The customer may make at least eight free withdrawals from the

account by check within a periodic cycle (for each transaction in

excess of this number, the regulation imposes a maximum charge of

$0.50);

3. The customer may make an unlimited number of free deposits and

withdrawals using deposit and withdrawal slips;

4. The amount that may be charged per periodic cycle for

maintaining the account may not exceed $3.00 per periodic cycle; and

5. A customer may not be charged for printing checks an amount

greater than that charged for regular checking account holders. In

addition, the depository institution may charge fees for automated

teller machine (ATM) usage and banking services if the fees are the

same as those for regular checking account holders for the same

services.

The NJCCAA further provides, in general, that a depository

institution may not discriminate against the holder of a New Jersey

Consumer Checking Account by furnishing fewer mail or electronic

banking services, or assessing higher fees, compared to the services

furnished to or fees assessed against regular checking account holders.

NJCCAA section 3.f. Section 3.h of the NJCCAA and section 3:1-19.4(a)

of the regulation set forth the limited conditions (including fraud and

a record of unpaid checks) under which a depository institution may

close or refuse to open a New Jersey Consumer Checking Account for a

customer.

The NJCCAA also prohibits a depository institution from requiring

that a holder of a New Jersey Consumer

[[Page 4516]]

Checking Account have another account or a credit card at that or any

other depository institution as a condition to opening or maintaining

the New Jersey Consumer Checking Account. NJCCAA section 3.i. Section 5

of the NJCCAA prescribes requirements for providing public notice of

the availability and features of a depository institution's New Jersey

Consumer Checking Account. Section 6 of the NJCCAA provides a private

right of action for violations of the NJCCAA, including injunctive

relief, and monetary damages. Finally, section 7 of the NJCCAA gives

the New Jersey Commissioner of Banking administrative enforcement

powers over institutions which fail to comply with the NJCCAA or any of

the Commissioner's regulations or orders thereunder. These powers

include the authority to issue a cease and desist order and assess a

civil money penalty.

The purpose of the Bank Enterprise Act is to provide Federally

insured depository institutions (including national banks) with an

incentive (e.g., a reduced Federal deposit insurance rate for deposits

attributable to lifeline accounts) to offer lifeline accounts,2

and to make loans and provide other financial assistance in distressed

communities. The term lifeline account is defined in section 232 of the

BEA (12 U.S.C. 1834) as a transaction account which meets certain

minimum requirements. The BEA does not, however, require depository

institutions to offer these lifeline accounts; that decision is left to

individual depository institutions.

\2\ Appropriations are required, however, to implement this and

other provisions of the BEA. Funds for the BEA have not yet been

appropriated, and the only funding that has been made available to

date is for a program based on the BEA that is administered by the

Administrator of the Community Development Financial Institutions

Fund (Administrator). See Appropriations Act for FY 1995, Pub. L.

No. 104-19, 109 Stat. 237 (July 27, 1995). The Administrator is

precluded by law, however, from using the amount of the deposit

insurance assessment as an incentive to participate in the program.

Riegle Community Development and Regulatory Improvement Act of 1994,

Pub. L. No. 103-325, section 114, 108 Stat. 2179 (Sept. 23, 1994)

(12 U.S.C. 4713).

---------------------------------------------------------------------------

The Interpretive Letter No. 572 noted that the factors established

in section 232 of the BEA (12 U.S.C. 1834) for the purpose of

determining whether a transaction account qualifies as a lifeline

account eligible for reduced Federal deposit insurance assessment rate

are virtually identical to those listed in the NJCCAA for the purpose

of determining whether an account qualifies as a New Jersey Consumer

Checking Account. The Letter concluded, among other things, that since

the NJCCAA requires Federally insured depository institutions doing

business in New Jersey to offer lifeline accounts, the NJCCAA is in

direct conflict with a Federal statute, the BEA, set forth in Title II,

Subtitle C of the Federal Deposit Insurance Corporation Improvement Act

of 1991, Pub. L. No. 102-242, 105 Stat. 2236 (FDICIA), (12 U.S.C.

1834), which expressly makes the offering of such accounts voluntary.

Although Interpretive Letter No. 572 recognized that both Congress and

the New Jersey legislature saw the benefits of widespread use of

lifeline accounts, it concluded that under Federal preemption

principles, the State's method must yield in the face of a directly

contrary Federal treatment of this issue.

The Department's position is that the BEA does not preempt the

NJCCAA, since the two laws are not in conflict. The Department states

that the philosophy of the NJCCAA, to provide basic checking services

to those in need of them, is consistent with that of the BEA. The

Department asserts that it is unlikely that Congress intended to

preclude individual states from requiring depository institutions to

provide basic checking services to those in need. The Department also

states that Interpretive Letter No. 572 did not fully consider

applicable case law in the area of preemption, citing for example, the

case of Best v. United States National Bank of Oregon, 303 Or. 557, 739

P. 2d 554 (1987).

Request for Comments

The OCC requests comments on all aspects of the request for

reconsideration of OCC's prior determination that the application of

New Jersey law to national banks is preempted by Federal law. Comments

should be submitted to the docket number and address indicated in the

ADDRESSES paragraph of this document. The OCC will carefully consider

any comments received and publish its final determination in response

to the request.

Dated: January 22, 1996.

Eugene A. Ludwig,

Comptroller of the Currency.

[FR Doc. 96-2387 Filed 2-5-96; 8:45 am]

BILLING CODE 4810-33-P