OCC Supports Federal Preemption on State Banks Imposing Interest Rate Caps
Commentary by Tim Byrne
In an amicus brief before the Tenth Circuit Court of Appeals, the OCC urged the full court to reconsider their decision to allow Colorado to impose an interest rate cap on an out-of-state bank making loans to in-state residents. The OCC argued that the decision undermines federal interest rate preemption for state-chartered banks.
In their brief in National Association of Industrial Bankers v. Weiser, the OCC argued that the panel's (2-1) decision places outside state banks at a competitive disadvantage compared to national banks by allowing any state - not only the state that had chartered the bank - to impose an interest rate cap on loans made to borrowers within such state. They argued that if state chartered banks could have caps imposed on their interest by foreign states, out-of-state banks would be required to determine the location of every prospective borrower in order to rule out the possibility of the borrower being located in the foreign state that has opted out of federal interest rate the exportation regime.
The OCC urged the Court to rehear the case en banc to protect state banks.
Commentary
The Comptroller’s brief notes that the Comptroller sits on the board of the Federal Deposit Insurance Corporation, in which capacity the Comptroller has an interest in preserving the competitive equality between national and state-chartered banks.