Defining the Scope of Federal Preemption: State Farm, Exclusive Agents, and Other Emerging Issues

The courts and the federal bank regulatory agencies have recognized that federal law broadly preempts state law with respect to the lending activities of federal savings associations, national banks, and the operating subsidiaries of both. In October 2004, the Office of Thrift Supervision issued an interpretive letter concluding that state licensing and registration requirements that do not apply to a federal savings bank also do not apply to qualifying agents where the agents perform marketing, solicitation, and customer service activities related to the bank's deposit and loan products and services and other authorized banking powers. In the context of refund anticipation loans, one court found that state law restrictions on agents that indirectly restrict national banks or their operating subsidiaries are preempted. As the scope of federal preemption has become more defined, plaintiffs have sometimes succeeded in avoiding preemption challenges by basing claims on unfair and deceptive trade practices, misrepresentation, and similar theories.