WASHINGTON (Legal Newsline) - The nation's state attorneys general are claiming the federal Office of the Comptroller of the Currency has been attempting to preempt state consumer protection laws for a decade.
They made the comment in response to new rules drafted by the OCC in May that implement several provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The AGs say the rules preempt state laws protecting consumers against national banks.
The AGs claim they are the ones who have been aggressively protecting consumers against abusive financial practices, pointing to multimillion-dollar settlements with First Alliance, Household Finance, Ameriquest and Countrywide.
"At the outset of the subprime lending debacle, many states enacted new restrictions on subprime loan origination and documentation practices," the AGs wrote Monday. "These state-level reforms occurred before any similar action at the federal level, and paved the way for the new mortgage rules in the Dodd-Frank Act.
"More recently, state attorneys general took the initiative in addressing mortgage-servicing failures and are now cooperating with federal authorities to bring needed reforms to loan servicing and foreclosure processing.
"Over the last decade, state attorneys general have vigorously opposed the OCC's aggressive campaign to preempt state consumer protection laws."
Indiana Attorney General Greg Zoeller says the proposed rules are inconsistent with Congress' directive when it passed the Dodd-Frank Act. Zoeller is the co-chair of the Consumer Protection Agency of the National Association of Attorneys General.
The OCC released a 71-page notice of its proposed rulemaking. In its own words, the new rules would permit the OCC to assume responsibility for the ongoing examination, supervision and regulation of national banks on July 21.
The U.S. Supreme Court ruled two years ago that state AGs could investigate national banks but could not subpoena financial institutions that have branches in other states on their own, overturning an appellate court's decision that said the OCC had the sole authority to probe national banks.
"The OCC's insistence on maintaining its posture in favor of broad preemption of state law is disappointing and ignores a clear Congressional mandate to the contrary," the letter said. "To comply with the new statutory directives on the preemption of state law, the OCC must review state financial laws on a case-by-case basis to determine whether those laws prevent or significantly interfere with national bank powers.
"The OCC should not rely on its former general preemption pronouncements, which were based on an improper standard and have been rejected by Congress."
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.