January 7, 2004
State Lawmakers Object to Exemption of National Banks From Consumer Protections
Congress urged to direct OCC to withdraw rules, hold hearings
WASHINGTON, D.C. - The National Conference of State Legislatures objects to two new rules implemented today by the Office of the Comptroller of the Currency to exempt national banks and their diverse range of operating subsidiaries from state consumer protection laws and enforcement actions.
"State lawmakers are dismayed that a federal regulator without a single congressional hearing would unilaterally rewrite federal law to preempt state authority and concentrate power with himself," said State Representative Donna Stone, who chairs the House Economic Development, Banking and Insurance Committee in Delaware and serves as chair of the NCSL Financial Services Committee. "The OCC action sweeps away virtually all state consumer protections and leaves banking consumers across the country vulnerable to deceptive trade practices."
Specifically, one OCC rule preempts virtually all state laws that apply to the activities of national banks and their operating subsidiaries. The OCC takes this action despite 140 years of congressional actions and Supreme Court decisions that subject national banks to state consumer protection and fair lending laws. Additionally, the rule goes beyond national banks to bar states from licensing, examining and regulating state-chartered non-bank subsidiaries of national banks.
The second rule gives the OCC the exclusive visitorial rights for national banks. This action effectively bars states from identifying wrongdoing on the part of national banks and their subsidiaries and keeps states from bringing enforcement actions in either state or federal court.
"There is no evidence that this broad expansion of the OCC's authority is needed or appropriate," Stone said. "The decentralized regulatory structure has produced a vibrant banking market that is the envy of the world. This action imposes a one-size-fits-all approach that threatens the states' role as laboratories of innovation and a safety value against rigid federal controls."
State lawmakers are urging members of Congress to tell the OCC to withdraw the rules and conduct hearings to thoroughly review the far-reaching implications that would result from such a radical change to the nation's banking system. In addition to policy objections, NCSL believes the OCC lacks the authority to unilaterally preempt state authority.
NCSL is a bipartisan organization serving the legislators and legislative staff of the states, commonwealths and territories. Its mission is to improve the quality and effectiveness of state legislatures, foster interstate communication and provide the states a strong, cohesive voice in the federal system.
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