Questions and Answers

The Constitution of the United States has a provision known as the "Supremacy Clause."  This provision reads: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” 

This provision has been interpreted to mean that if there is a conflict between federal law and state law, the federal law controls.  The Office of the Comptroller of the Currency takes the position that certain types of state laws conflict with the federal law that authorizes national banks to lend money.  The OCC has issued regulations that list the types of state laws the OCC feels are preempted and are not preempted. 

Here is the list for non-real estate loans. It appears in 12 CFR 7.4008. See 12 CFR 34.4 for similar lists affecting real estate lending.

A national bank may make non-real estate loans without regard to state law limitations concerning:

(i)    Licensing, registration (except for purposes of service of process), filings, or reports by creditors;

(ii)    The ability of a creditor to require or obtain insurance for collateral or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices;

(iii)    Loan-to-value ratios;

(iv)    The terms of credit, including the schedule for repayment of principal and interest, amortization of loans, balance, payments due, minimum payments, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan;

(v)     Escrow accounts, impound accounts, and similar accounts;

(vi)    Security property, including leaseholds;

(vii)    Access to, and use of, credit reports;

(viii)   Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents;

(ix)    Disbursements and repayments; and

(x)     Rates of interest on loans.

 State laws that are not preempted. State laws on the following subjects are not inconsistent with the non-real estate lending powers of national banks and apply to national banks to the extent that they only incidentally affect the exercise of national banks' non-real estate lending powers:

(1)   Contracts;

(2)   Torts;

(3)   Criminal law;\7\

(4)   Rights to collect debts;

(5)   Acquisition and transfer of property;

(6)   Taxation;

(7)   Zoning; and

(8)   Any other law the effect of which the OCC determines to be incidental to the non-real estate lending operations of national banks or otherwise consistent with the powers set out in paragraph (a) of this section.