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


  • Mark Furletti


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.

Suggested Citation

  • Mark Furletti, 2004. "The debate over the National Bank Act and the preemption of state efforts to regulate credit cards," Payment Cards Center Discussion Paper 04-02, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpdp:04-02

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    References listed on IDEAS

    1. Shawn A. Cole & John Thompson & Peter Tufano, 2008. "Where Does it Go? Spending by the Financially Constrained," Harvard Business School Working Papers 08-083, Harvard Business School, revised Apr 2008.
    2. Kevin Foster & Erik Meijer & Scott Schuh & Michael A. Zabek, 2011. "The 2009 survey of consumer payment choice," Public Policy Discussion Paper 11-1, Federal Reserve Bank of Boston.
    3. Julia S. Cheney & Sherrie L. W. Rhine, 2006. "How effective were the financial safety nets in the aftermath of Katrina?," Payment Cards Center Discussion Paper 06-01, Federal Reserve Bank of Philadelphia.
    4. Susan Herbst-Murphy, 2012. "Government use of the payment card system: issuance, acceptance, and regulation," Payment Cards Center Discussion Paper 12-06, Federal Reserve Bank of Philadelphia.
    5. Herbst-Murphy, Susan, 2015. "Trends and preferences in consumer payments: updates from the visa payment panel study," Payment Cards Center Discussion Paper 15-2, Federal Reserve Bank of Philadelphia.
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    Cited by:

    1. Chatterji, Aaron K. & Seamans, Robert C., 2012. "Entrepreneurial finance, credit cards, and race," Journal of Financial Economics, Elsevier, vol. 106(1), pages 182-195.
    2. Whalen, Gary W., 2008. "The impact of preemption of the Georgia Fair Lending Act by the OCC on national and state banks and the dual banking system," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(4), pages 772-791, November.
    3. John R. Walter, 2006. "The 3-6-3 rule : an urban myth?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 51-78.

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    National Bank Act ; Credit cards ; Consumer protection;

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