00-27348. Notice of Request for Preemption Determination

AGENCY:

Office of the Comptroller of the Currency, Treasury.

ACTION:

Notice and request for comment.

SUMMARY:

The Office of the Comptroller of the Currency (OCC) is publishing for comment two written requests for the OCC's opinion about whether Federal law would preempt certain provisions of the Michigan Motor Vehicles Sales Finance Act (MVSFA) as interpreted by the Michigan Financial Institutions Bureau (FIB), that limit the ability of banks to make loans to finance motor vehicle sales. The purpose of this notice and request for comment is to provide interested persons with an opportunity to submit comments on this matter prior to the OCC's issuance of an opinion.

DATES:

Comments must be received on or before November 24, 2000.

ADDRESSES:

Comments should be sent to the Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Third Floor, Attention: Docket No. 00-22, Washington, DC 20219. You may submit comments electronically to [e-mail] or by facsimile transmission to [phone]. You can inspect and photocopy the comments at the OCC's Public Reference Room, 250 E Street, SW., Washington, DC, between 9 a.m. and 5 p.m. on business days. You can make an appointment to inspect the comments by calling [phone].

FOR FURTHER INFORMATION CONTACT:

Michele Meyer, Senior Attorney, or Mark Tenhundfeld, Assistant Director, Legislative and Regulatory Activities Division, [phone].

SUPPLEMENTARY INFORMATION:

Background

The requesters are national banks headquartered in Ohio that would like to conduct motor vehicles sales financing through automobile dealers in Michigan. The banks would enter into agreements with the dealers under which the dealers would act as the banks' agents for the purpose of soliciting loans to finance motor vehicles, taking applications for the vehicle loans, preparing the loan documentation, and obtaining the buyers' signatures on all required documents. The banks would prescribe the terms of the loan, including the minimum interest rate, and fund the loans.

This method of conducting business is inconsistent with a Declaratory Ruling issued by the FIB on January, 1, 2000, concerning this proposed practice.^[1] The FIB concluded that, under the MVSFA, the proposed arrangement between the banks and Michigan motor vehicle dealers would result in “installment sale contracts” subject to the MVSFA.^[2] In order for a motor vehicle installment sale contract to comply with the MVSFA: (1) The dealer must originate the loan as a licensed installment seller of motor vehicles; and (2) the bank may only purchase the loan, as a licensed sales finance company.^[3] The transaction must also comply with the several other requirements of the MVSFA that apply to installment sale contracts.^[4] Thus, a national bank cannot originate motor vehicle loans through a dealer agent.

The requesters have asked our opinion whether the National Bank Act preempts the provisions of the MVSFA described in this notice, as those provisions have been interpreted by the FIB, with respect to national banks. The requesters assert that the FIB's construction of the proposed financing transactions as installment sale contracts under the MVSFA impairs a national bank's authority under the National Bank Act to make loans and determine the interest rates on those loans.^[5] The requesters contend that the FIB's construction of the proposed financing transactions as installment sale contracts subject to the MVSFA is an impermissible state restriction of a national bank's exercise of its authority under 12 U.S.C. 24(Seventh) to originate loans directly to the bank's customers through third-party agents without having to obtain state licenses. The requesters further assert that the FIB's interpretation, which required the dealer, rather than the bank, to originate the loans unlawfully restricts a national bank's authority under 12 U.S.C. 85 to charge interest on loans at the rate allowed by the bank's home state.

Request for Comment

Section 114 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) generally requires the OCC to publish in the Federal Register a descriptive notice of certain requests that the OCC receives for preemption opinions.^[6] Under section 114, the OCC must publish notice before it issues any opinion letter or interpretive rule opining that Federal law preempts the application to a national bank of any State law in four designated areas: community reinvestment, consumer protection, fair lending, or the establishment of intrastate branches. Pursuant to section 114, interested persons have at least 30 days to submit written comments. Without making a determination as to whether section 114 applies to this request, the OCC has decided that it is appropriate to use notice and comment procedures.

The OCC requests comments on the issues described above. The OCC will publish in the Federal Register any final opinion letter we issue in response to the requests.

Dated: October 16, 2000.

John D. Hawke, Jr.

Comptroller of the Currency.

Footnotes

1.  In the Matter of: Request by Rodney D. Martin on Behalf of National City Bank for a Declaratory Ruling on the Applicability of the Motor Vehicle Sales Finance Act to Certain Transactions (January 1, 2000).

2.  Section 2 of the MVSFA defines an “installment sale contract” as one “for the retail sale of a motor vehicle, or which has a similar purpose or effect, under which part or all of the price is payable in 2 or more scheduled payments subsequent to the making of the contract * * *” MCL 492.102(9); MSA 23.628(2)(9).

3.  MCL 492.103(a) and (b); MSA 23.628(3)(a) and (b).

4.  These include, for example, provisions concerning the form and contents of an installment sales contract, disclosures that must be made to the buyer, the amount and computation of fees and finance charges, and prohibited charges. See MCL 492.112-492.134.

5.  The requesters contend that the proposed financing transactions would not result installment sale contracts under the meaning of the MVSFA because the banks and their customers would be contracting for loans and not “for the retail sale of * * * motor vehicle[s].” The FIB, as indicated in its Declaratory Ruling, disagrees with this interpretation and considers the transactions installment sale contracts subject to the requirements of the MVSFA.

6.  12 U.S.C. 43.