The debate over the National Bank Act and the preemption of state efforts to regulate credit cards

The National Bank Act (NBA), the 140- year-old statute that led to the creation of nationally chartered banks, has likely been one of the most influential forces in the formation and development of the U.S. credit card industry. The NBA gives nationally chartered banks a wide range of powers and protections. One of these protections, the ability to disregard certain state laws, is currently at the center of a very heated debate. The regulator of national banks, the OCC, recently issued a rule that interprets the act as essentially preempting most state efforts to protect credit card consumers. State attorneys general, consumer advocates, and members of Congress have charged that the OCC’s ruling is overly aggressive and results in bad public policy. This paper examines the current debate over preemption and its regulatory consequences. It analyzes how the expanding scope of preemption has affected the development of the credit card industry and the likely impact of the current debate on the industry’s future.