BY MARGARET WEIR WESTBY, ESQ., CRCM
What exactly is “preemption”?
Preemption is where the laws of one level of
government supersede the laws of a lower level.
Generally we are discussing where federal
legislative action comes into conflict with state
action. To say federal law “preempts” state law,
one would be saying the federal law is superior and
applies instead of the state law. Preemption analysis
also occurs between state and local laws, and
between U.S. and international law. Here, we will
just discuss the issue between federal and state law.
Why do we care?
In banking, preemption comes up quite a bit because
banks are federally regulated and those regulations
often supersede state regulations—but not always!
Especially in an environment where Washington
seems to be in the mood to reduce some regulatory
burden, state legislatures or even citizens through state
constitution amendments, may take up the charge to fill
those gaps. Will those state efforts apply to you, or not?
The ABA Banking Journal adds, “If preemption teeters
toward the states, banks of all charters could find
themselves with greater compliance and other costs
rather than focusing on empowering economic growth
for their customers and communities.”(see https://