OCC fights w/ state & local government
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Throughout the legislative and legal campaigns by powerful bank lobbyists to defeat tough new state and local laws banning double ATM fees, requiring more credit card disclosures, protecting customer privacy, and preventing predatory lending, the bank lobbyists have been aided and abetted by lawyers from the federal Office of the Comptroller of the Currency (OCC). This obscure and previously little-noticed agency regulates all commercial banks with the word "national" (or N.A.) in their names and is part of the US Treasury Department.
Throughout its history, the agency has demonstrated the classic characteristic of a "captive regulator:" OCC places the interests of the regulated above the public interest. Part of its problem is that it has a conflicting mission: it has both supervisory and promotional responsibilities over national banks. A second, perhaps worse problem is that OCC derives the vast bulk of its budget directly from its regulated banks. If it is too hard on national banks, they could switch to state charters, reducing the OCC's budget.
In January, 2004 the OCC issued two related and sweeping rules, one preempting nearly all state and local consumer laws (the "preemption rule") [69 Fed. Reg. 1904 (2004)] and the other restricting nearly all enforcement powers of state regulators and attorneys general (the "visitorial powers rule.") [69 Fed. Reg. 1895 (2004)] over national banks, and incredibly, their state-licensed operating subsidiaries, which are not banks.
The OCC asserts it has somehow been granted broad authority from Congress to "take the field" over virtually all matters pertaining to national banks and their state-licensed operating subsidiaries, even where no federal law protects consumers from unfair or predatory financial practices. The OCC says this, even though the clearest recent statement from the Congress had been that the OCC had been "inappropriately aggressive" in preempting consumer, community and other laws.
In the new preemption rule the OCC re-wrote and weakened the applicable Supreme Court preemption test from the 1996 Barnett decision. The OCC rule downgraded the Court's strict "prevent(s) or significantly interfere(s)" standard with a sweeping preemption of nearly all state laws even if they merely "obstruct, impair, or condition" a national bank's exercise of powers.
In its visitorial powers rule OCC rolled-back long-standing authority of state attorneys general and other officials to investigate or enforce violations by national banks. OCC also boldly asserted that these new limits extended even to actions against a national bank's state-licensed operating subsidiaries.
the agency's recent preemptive actions have been buttressed by a series of court decisions that have granted undue deference to the agency's rulings. Often, the agency has amended its rules in the middle of court battles, and counted on the courts to agree with their opinion. So, the most likely solution to the OCC's new rules will need to come from Congress, not the courts. Congress needs to re-state more clearly what most impartial (not the OCC, not the banks) observers have always believed to be the law: First, national banks must comply with state and local laws that are stronger than, but not inconsistent with, federal law. Second, operating subsidiaries are not national banks.
States Storm Back Against OCC's Storm Against The States
The issuance of the OCC rules has sparked a bi-partisan storm of protest from state legislatures, state financial regulators and state attorneys general. The attorneys general particularly criticized the OCC'outrageous characterization that the "National Bank Act protect[s] national banks from potential state hostility..." Calling the states "hostile" does not advance any legitimate argument.