Tuesday, May 17, 2011
A three-judge panel of the Eleventh Circuit ruled last week in Baptista v. JP Morgan Chase Bank, N.A. that Office of the Comptroller of the Currency regulations promulgated under the National Bank Act preempted Florida's "par value" statute.
Florida's statute, Fla. Stat. Sec. 655.85, specifically prohibits a bank from "settl[ing] any check drawn on it otherwise than at par." Thus when Baptista (who had no account at Chase) was charged a $6.00 fee when she sought to cash a check drawn on a Chase account, she sued, arguing that Chase's check-cashing service fee violated Florida law.
But OCC regulations allow a national bank to "charge its customers non-interest charges and fees, including deposit account service charges." 12 C.F.R. Sec. 7.4002(a). OCC interpretive letters define "customer" to include "any person who presents a check for payment."
The court ruled that the OCC regs conflict with, and thus preempt, Florida's par value statute, applying the preemption standard from Section 5136(b)(1)(B) of the new Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010:
State consumer financial laws are preempted, only if . . . in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner, et al. . . . the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers . . . .
12 U.S.C. Sec. 25b(b)(1).
The Eleventh Circuit is apparently only the second federal appeals court to rule on preemption of state par value laws. The Fifth Circuit was the first, in Wells Fargo Bank of Texas NA v. James, a 2003 case also ruling that OCC regs and the NBA preempt. (The Fifth Circuit applied the Barnett Bank preemption standard as part of its analysis. The case obviously predated the preemption provision in the Dodd-Frank Act.)