THe baNKING laW JourNal
sociations only if they prevent or significantly interfere with the banks’ or thrifts’ exercise of powers granted to them by federal law. Subsidiaries and affiliates of these banks and thrifts, however, are made subject to state law despite potentially contrary provisions of the National Bank Act and Home Owners’ Loan Act. Finally, although states are allowed to enforce provisions of the CFP Act, restrictions are placed on states’ ability to enforce the Act against national banks and federal savings associations.
dodd-Frank’s consumer Protection Provisions Generally PreemPt only inconsistent state laws
Entities covered under the CFP Act remain subject to state laws unless the laws are “inconsistent” with the Act’s provisions.5 A state law is not in- consistent, however, if it provides greater protection to consumers than the “protection provided under [the Act].” This framework strongly suggests that federal law will provide a minimum level of consumer financial protection
and perhaps a corresponding minimum level of regulation — for covered
entities. In other words, each state would be free to provide greater protec- tion to consumers — and greater regulation of covered entities — within each state’s jurisdiction. The Bureau is authorized to determine whether state law is inconsistent with the Act on its own or “in response to a nonfrivolous petition initiated by any interested person.”6
The Act also includes a process that requires the Bureau to issue a notice of proposed rulemaking if a majority of states enact a resolution in favor of the Bureau modifying or establishing a consumer protection regulation.7 The Bureau would be required to consider whether: (1) the proposed regulation would provide greater consumer protection; (2) the benefits for consumers would outweigh increased costs; and (3) any advice from federal banking agencies suggests that the regulation would pose a safety and soundness risk to banks. The Bureau must include a discussion of these considerations in the ederal Register in its notice of final regulation. If it decides not to issue a final regulation, it must explain its decision in the ederal Register and notify Congress.
These provisions appear to give the Bureau authority to preempt state laws that do not provide a level of consumer protection that is, in the Bu-