Your Legislature Passed a Bank Law for You. Whether It Reaches Your Bank Comes Down to a Charter.

Your state legislature keeps passing laws about how banks have to treat you. Fee limits, disclosure rules, consumer protection standards. Whether any of it reaches the bank holding your checking account depends on a piece of paper you have never read, and on September 17 the FDIC board voted to make that dependence wider.

The proposal is called State Bank Parity. It went into the Federal Register on September 22 and comments close November 23.

Read what it says and the plain-English version arrives fast. Host-state laws, “including laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches,” would apply to an out-of-state state bank to the same extent they apply to an out-of-state national bank. The FDIC’s own summary: when host state laws do not apply to a national bank, those laws would similarly not apply to an out-of-state state bank.

Translation: your state’s law now reaches your bank only as far as it already reaches the big national ones. Which, lately, is not far.

What set this off was Illinois. The state banned interchange fees on the tax and tip portions of card transactions. The OCC published an order on April 29 concluding that federal law preempts that ban for national banks and federal savings associations, effective June 30. That left state banks and national banks doing identical business under different rules, and the FDIC decided the fix was to excuse everybody.

Here’s why you should care about a fight that looks like it’s between banks. We watched this exact mechanism take real money out of real accounts in June, when the OCC ruled that federal law overrides state interest-on-escrow laws in 14 jurisdictions. New York and California had set a floor of 2 percent. On June 18 it went to nothing. Nobody voted to repeal those laws. They just stopped applying.

Give the FDIC this much: parity is a real argument. Two banks doing identical business on the same street shouldn’t face different rules because of who signed their charter.

There were two ways to level it, though. Apply the state law to everyone, or apply it to no one. They picked no one.

The rule does not touch what your bank can charge you in interest on a loan. The FDIC says plainly that loan rates stay governed by section 27 of the Federal Deposit Insurance Act. This is about which state consumer rules reach the bank, not about rate caps.

File a comment. The docket is open until November 23, and rulemaking dockets on retail banking are dominated by trade groups because almost no account holders bother. Then go read the governing-law paragraph in your deposit agreement, the one near the arbitration clause. It tells you which state’s rules your bank thinks apply to your money.

Knowing the answer won’t change it. It will change which headlines you need to read. If you are shopping yields while you’re in there, our savings picks and the savings calculator are the faster errand.

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