Example Of Essay On Concept Of Pre-Emption
The federal government plays a great role in establishing federal laws. These laws govern the activities of the entire United States. On the other hand, each state has its own laws and they are effective for each specific state. However, the state laws should borrow from the federal laws meaning that any conflict between this laws leads to the concept of pre-emption. Overall, it should be understood that the federal laws are more superior to the state laws. Therefore, the federal government may impel the states to change their laws if they do not conform to its provisions.
According to the case in hand, the Office of the Comptroller of Currency (OCC) and the Office of Thrift Supervison (OTS) makes the pre-emption that affects the banking laws. These two agencies have much power and authority and thus they are able to decide the law that should be pre-empted. As a result, the court makes their rule on banking laws with reference to OCC’s interpretations, especially when the federal laws seem confusing. If the federal laws stand to be viable with respect to the case in hand, the courts rule the case with respect to the federal laws.
The federal law and regulations has the mandate to pre-empt Ordinances hence they may be invalid on the grounds of Supremacy Clause as provided by the constitution. The state regulation of banks remains viable only when it does not interfere or prevent national bank’s exercise of its powers. This is to mean that the state laws retains some power to control national banks in the grounds of contracts, transfer of property, tort law, taxation, acquisition and debt collection. The presumption against pre-emption of the state law in this case is inapplicable since federal is always present as history proclaims.
Background of the case
The case involves the Bank of America as the plaintiff and the cities of Santa Monica and San Francisco as the defendant. Prior to the filing the case, the cities of Santa Monica and San Francisco enacted regulations that prohibited financial institutions within them from charging ATM fees to non-depositors. The regulations affected all financial institutions such as saving banks, industrial loan, Bank of America, savings association and Wells Fargo Bank. The following allegations followed the move brought by the regulations enacted by the cities. First, the cities claimed that the ATM fees charged to non-depositors harm the consumers since the charging is done twice via the ATM.
They further hold that the ATM charges put undue pressure to the elderly, the poor and the disabled because they lack choice over the ATMs to use and possess lower mobility. The second claim is that ATM fees hinder competition in the local banking industry. This is because they offer similar ATM charges and as a result, they do not give consumers an opportunity to make choices on the ATM facility to use. As a fact, the smaller banks and credit union automatically lose their market share to larger banks since many depositors would prefer to avoid the ATM fees by transferring their accounts to banks that possess many ATMs in the Cities.
The banks go against the Cities claims about the ATM market. The reject the Cities claim that the ATM fees has resulted to greater concentration in the local banking industry. Furthermore, the banks have the opinion that the Ordinances provided by the cities impair their ability to compete. Ideally, this is because the Ordinances definition of the financial institution does not cover all the ATM operators in the city. An outstanding example is the credit card companies are not covered within the definition of the financial institutions. As a result, the Ordinances put the banks at a competitive disadvantage to other financial institutions that offer ATM services in the Cities. Therefore, the banks felt that these Ordinances were to their disadvantages and filed a case against the cities of Santa Monica and San Francisco.
Should federal bank be allowed to charge the ATM fee they charge necessary?
The court would first look at the case in two broad ways one would be that the cities have the right to protect their citizens against exploitation by the banks. On the other hand, the court will also look at the rights of the Cities’ banks to offer service via their laws provided by the constitution. In so doing, the court was impelled to look keenly at the consumer protection laws that concern banking as well as addressing the issue with respect to banks laws as per the federal laws.
The court had to look at various provisions before coming in to conclusion of the case. First was to consider the National Bank Act that pre-empts the ordinances. Banks are created for public service by the federal government and thus there provisions are linked to the constitution. The state plays a great role in controlling the national banks whose provisions become void if they conflict with the federal law or affect the efficiency of the national banks to carry out their duties to the public. As a result, the National Bank Act of 1864 gives the national banks the power and authority to carry on the business of banking. As per the case the Act gives the bank the authority and power to receive deposits through buying and selling exchange, bullion, coin, and make profit from such services.
The court also considered the OCC regulations that allow the national banks to charge ATM fees. The OCC regulations give the national banks the authority to offer banking in electronic means to the public for a fee. According to 7.4002 (a) the OCC permits banks to collect non-interest fees and charges from the customers for the services rendered not forgetting charges associated with deposit account services. The amount of the fees or charges to the consumers depends on the decision made by each individual bank with respect to their business judgement and banking principles. Furthermore, the provision does not clarify the depositors from non-depositors as far as charging fees by the national banks are concerned. Ideally, this means that the national banks have the authority to charge ATM fees even to non-depositors.
Finally, the court should also consider the EFTA provisions that give the states the mandate to regulate ATM fees with the aim of protecting the consumers. Although the Cities put their claim EFTA provisions are part of Consumer Protection Acts, these issue is contrary with the provisions of EFTA. EFTA regulations are not a type of a consumer protection measure and thus the Cities claims are premature.
The judge will seem to agree with the OCC provisions and the federal regulations that give the banks the mandate to offer service to the public at a fee. More specifically, the judge will focus more on the OCC provisions that allows the banks to offer services to the public at a fee. The case surrounds the move by the Santa Monica and San Francisco alleging that banks should not charge ATM fees to non-depositors. The federal law through the National Bank Act allows the banks to offer banking services to the public and charge fees that conforms to their judgement and principles. As a result, the move by the Cities to proclaim otherwise goes against the provisions of the federal law.
The federal law are purported by the provisions of the constitution that remains the final. It is therefore not in order for the Cities to prevent the banks from exercising their rights and performing their duties as per the Act. The court should therefore side line with the banks and prohibit the Cities from interfering within the functioning of the banks to ensure a smooth provision of financial services to the public.
In conclusion, it is true that the federal bank should be allowed to charge ATM fees. Basing argument on the case, the court should hold that the Nation Bank and OCC regulations pre-empt the Ordinances from stopping the National Bank from doing the same. Therefore, the court should prohibit the cities from imposing Ordinances hence; the banks were free to charge the ATM fees.
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