In recent years, a number of courts have held that the National Bank Act, 12 U.S.C. 21, et seq., (“NBA”), preempts application of state consumer protection laws against national banks where the state law “significantly impaired” the purpose of the federal act or its implementing regulations.  In Baptista v. J.P. Morgan Chase Bank, N.A., 640 F.3d 1194 (11th. Cir. 2011), for example, the 11th Circuit held that Florida’s “par value” statute, which prohibits a bank from charging a fee for cashing a check drawn on a depositor’s account, could not be enforced against nationally chartered banks because it conflicted with a federal regulation allowing national banks to charge customers “non-interest charges and fees, including deposit account service charges.”

The 11th Circuit has now concluded that this same preemption standard governs the application of host-state consumer protection statutes to out-of-state state-chartered banks.  In Pereira v. Regions Bank, Case No. 13-10458 (May 30, 2014), see attached opinion, plaintiffs asserted a putative class action against an Alabama bank based on the same Florida “par value” fee statute at issue in Baptista.  The district court held that the statute was preempted as to out-of-state state banks to the same extent as national banks, and the 11th Circuit affirmed.

The Court’s decision was based on subsection 12 U.S.C. §1831a(j) of the NBA, entitled “Activities of branches of out-of-state banks.”  It provides:

The laws of a host State. . .  shall apply to an branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank.  To the extent host State law is inapplicable to a branch of an out-of-state State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.

12 U.S.C. §1831a(j)(1). The 11th Circuit held that the plain language of the statute compelled this conclusion, giving little credence to plaintiffs’ attempt to distinguish Section 1831a(j) based on the use of the term “apply.”  It also cited to the legislative history of the provision, noting that when it was amended in 1997, members of Congress expressly stated that the goal was to change how states regulate out-of-state banks so that they were treated like out-of-state national banks instead of in-state state banks.

The Pereira decision helps ensure that out-of-state state banks are not at a disadvantage when competing against national banks in a host state.  When an out-of-state state bank is sued for alleged violation of host state consumer protection or fair lending statutes, bank counsel should carefully review NBA and its implementing regulations, to see whether that statute in question would materially interfere with the powers granted to national banks under those provisions.  Likewise, plaintiffs counsel should be mindful of this holding before challenging an out-of-state state bank based on host-state consumer statutes.