ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release January 30, 2004 #04-06
E-mail: [email protected]

ACB DEFENDS FEDERAL PREEMPTION IN U.S. SUPREME COURT BRIEF

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WASHINGTON, D.C. — America’s Community Bankers and four state trade groups have urged the U.S. Supreme Court to review and, ultimately, reverse a troubling state court decision that threatens to undermine the long-established preemption authority for federal savings associations.

In a case involving a choice-of-law provision in a credit agreement, a very common practice in lending documents, ACB, the Connecticut Bankers Association, the Maryland Bankers Association, the New Jersey League of Community Bankers and the North Carolina Bankers Association filed an amicus brief in support of Chevy Chase Bank, F.S.B., Chevy Chase, Md.

The brief asks the court to review a decision by the Maryland Court of Appeals holding that a reference to state law in the bank’s credit agreement could be considered a voluntary agreement to be governed by otherwise preempted state law. ACB and the others argued that this wrongly decided ruling could disrupt the lending activities of institutions nationwide chartered by the Office of Thrift Supervision.

ACB said the issue is whether the lending activities of federally chartered savings associations will be governed by uniform principles of federal law, as provided for in the Home Owners’ Loan Act and implemented by OTS regulations, or by a patchwork of overlapping and inconsistent state laws.

The state court of appeals held that the use of a choice-of-law clause, which contained a specific reference to Maryland’s usury laws, might constitute a voluntary commitment by the lender to be bound by otherwise preempted state laws.

While the state court of appeals has remanded the case to the trial court to determine whether common law principles regarding contract interpretation prevail over federal preemption, ACB and the others are urging the Supreme Court to rule that the Maryland Court of Appeals’ decision conflicts with its earlier — and controlling — preemption cases.

The brief is attached.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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