WASHINGTON
-- Comptroller of the Currency John D. Hawke, Jr. told a Senate panel today
that there are a few overarching considerations as background for discussion of
the OCCs recently issued rules on preemption and visitorial powers.
Mr.
Hawke opened his testimony before the Senate Committee on Banking, Housing, and
Urban Affair by emphasizing that:
- National banks and their subsidiaries are highly regulated and
closely supervised. While we
occasionally confront instances of abusive conduct at our banks, the
overwhelming number of our banks operate in conformity with the law and
with recognized standards of sound banking and fair practices. Because of this it is not at all
surprising that the state attorneys general have repeatedly stated that
predatory lending is not a problem in the regulated banking system.
- The OCC is committed to protecting and helping customers of national
banks and we have ample resources and formidable enforcement powers to
carry out that commitment. We have
a world-class customer assistance group that resolves literally tens of
thousands of inquiries and complaints every year. And where continued or persistent
problems have arisen, our track record shows that we will use our supervisory
and enforcement powers promptly and effectively to fix them. With the
formal enforcement powers that we have, plus the authority and influence
that our examiners exercise over the banks they supervise, I believe we
have an unmatched ability to afford consumers the protections we all want
for them.
- We recognize that our counterparts at other agencies and in state
law enforcement share this commitment to protect consumers, and we welcome
opportunities to share information and cooperate and coordinate with them
to address customer complaints and consumer protection issues. Through a coordinated and cooperative
approach to the remedying of abuses I believe we can achieve a high level
of protection for consumers.
Concerned
by the widespread misunderstanding and mischaracterization of the OCCs rules,
Comptroller Hawke articulated what the OCCs new regulations do and what they
would not do.
The first regulation which Ill call the
preemption rule codifies principles that have been established in almost 200
years of decisions by the Supreme Court and lower federal courts, that have
been applied in innumerable interpretations and rulings of the OCC over many
years, and that have been embodied in regulations of our sister agency, the
Office of Thrift Supervision, for many years, said Mr. Hawke.
Its
important to emphasize what the regulation does not change, since some
confusion may exist on this score, said Comptroller Hawke. The OCCs preemption regulation does not
preempt state laws other than those listed; does not immunize national banks
from complying with a host of state laws such as contract law, tort law, public
safety laws, and generally applicable criminal laws; does not preempt
anti-discrimination laws; does not extend to activities authorized for
financial subsidiaries of national banks; does not impinge on the functional
regulation framework that Congress set in place in the Gramm-Leach-Bliley Act;
does not allow national banks to charge higher rates of interest than they
previously could; does not authorize
any new national bank powerssuch as real estate brokerage; and makes no
changes to existing OCC rules governing the activities of operating
subsidiaries.
Our second rule the visitorial powers
rule -- amends an existing regulation implementing a federal statute that is as
old as the national banking system itself and that grants the OCC exclusive
authority to supervise, examine, and regulate the national banking system, Mr.
Hawke told the committee. Congress reemphasized this principle of exclusive
visitorial powers only recently in the Riegle-Neal Interstate Branching law by
explicitly providing that to the extent state consumer protection laws apply to
the interstate branches of national banks that is, where those laws are not
preempted under the long-standing principles I have referred to -- the OCC is
the exclusive enforcement authority for such laws with respect to national
banks.
Mr.
Hawke addressed the positive effects of the rule changes on enabling banks to
operate more efficiently. The rule also puts into place additional
focused standards to protect customers of national banks from unfair,
deceptive, abusive or predatory lending practices. These new standards apply nationwide, to all national banks, and
provide additional protections to national bank customers in every state
including those states that do not have their own predatory lending
standards. The rule does not leave customers of national banks
or their subsidiaries vulnerable to predatory lending practices.
The
regulation first provides that national banks may not make consumer loans based
predominantly on the foreclosure or liquidation value of a borrowers
collateral, Mr. Hawke said. This will
target the most egregious aspect of predatory lending, where a lender extends
credit, based not on a reasonable determination of a borrowers ability to
repay, but on a lenders calculation of its ability to seize the borrowers
accumulated equity in his or her home.
Mr.
Hawke underscored that the regulation specifically provides that national banks
shall not engage in unfair or deceptive practices within the meaning of section
5 of the Federal Trade Commission Act in their lending activities and that the
OCC was the first federal banking agency to assert the power to take
enforcement actions for violations of section 5.
State attorneys general have repeatedly stated that
the problems of predatory lending are largely confined to unregulated,
nondepository institutions and have not been in evidence in regulated banks or
their subsidiaries, he said.
Our approach to predatory lending is a
comprehensive, ongoing, integrated supervisory approach, focused on preventing
predatory practices, not on
banning or restricting specified loan products based on their terms,
Comptroller Hawke said. We have substantial resources available, nationwide,
to make sure that our supervision, in this and other areas, is effective.
We believe our approach does not constrict credit
availability from legitimate highly regulated lenders, and effectively protects customers of
national banks and their subsidiaries against predatory lending practices.
Comptroller
Hawke concluded his testimony by stating that, We believe that our new rules
are legally sound, that they enable national banks to operate in a manner fully
consistent with the character of their federal charter. Most importantly, coupled with the strong
oversight and enforcement powers that the OCC can and will bring to bear, they
do not leave national bank customers exposed to abusive practices. We share with our colleagues in the states
a commitment to assuring that national banks treatment of their customers
meets the highest standards, and I am confident that if we work in cooperation
and coordination we can all fulfill that commitment.
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The
OCC charters, regulates and examines approximately 2,000 national banks and
51 federal branches of foreign banks in the U.S., accounting for more than 56
percent of the nations banking assets. Its mission is to ensure a safe and
sound and competitive national banking system that supports the citizens,
communities and economy of the United States.
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