In a significant ruling on February 18, 2025, the Wisconsin Court of Appeals determined that National Bank Act (NBA) does not preempt the procedural “right to cure” notice requirements mandated by the Wisconsin Consumer Act (WCA), reversing a judgment in two debt collection actions.
The court, thereby, determined that this state-level consumer protection was not preempted by the NBA.
The case arose as a result of legal proceedings brought by a national bank to recover two credit card debts following a default by the credit card holder. The credit card holder contended that the bank failed to comply with the WCA’s notice provisions, which require creditors to issue a Notice of Right to Cure Default before commencing collection actions. The bank argued that these state requirements were preempted by the NBA, asserting federal law supremacy over state regulations in banking operations.
The Court of Appeals, however, rejected this preemption claim. Citing the U.S. Supreme Court’s decision in Cantero v. Bank of America, N.A. (2024), the court emphasized that state laws are preempted by the NBA only when they “prevent or significantly interfere” with a national bank’s exercise of its powers. The court found that the WCA’s notice requirements did not impose such a burden on the bank’s operations.
The Cantero decision has become a pivotal reference for cases involving NBA preemption of state consumer protection laws. In Cantero, the Supreme Court remanded the case to the Second Circuit, instructing it to apply a nuanced analysis to determine whether New York’s law requiring interest payments on mortgage escrow accounts was preempted by the NBA. Oral argument in the Second Circuit is scheduled for March 3.
This recent ruling in Wisconsin continues to underscores the necessity for national banks to carefully assess the impact of state laws on their operations.
We have been advising numerous banks with respect to identifying and evaluating state laws that apply to their products and services in light of the evolving NBA preemption landscape. Given this ruling, we encourage national banks to conduct thorough reviews of their state law inventories to ensure compliance with applicable state laws that may not be subject to NBA preemption.
In light of the decreased activity by the federal regulators, we expect that this decision will continue to embolden state attorneys general and regulators as they step up their activities relating to enforcing consumer finance laws.
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