New York Officials, Naacp Call On The Occ To Reverse Its Position On Federal Preemption Of State Predatory Lending Laws
U.S. Congressmen Charles B. Rangel and Gregory W. Meeks, NAACP President Kwesi Mfume, State Attorney General Spitzer and a number of national consumer advocates called on the Office of the Comptroller of the Currency (OCC) to withdraw its proposed regulations that would exempt national banks from nearly all consumer protection laws.
The officials said the OCC's proposed regulations would result in an unprecedented expansion of the OCC's powers, while at the same time shield banks from actions undertaken by state enforcement officials to halt predatory lending, which has become a top consumer issue in many minority communities.
Congressman Rangel said: "There is no reason for the OCC to promulgate regulations to now prohibit State Attorneys General from the enforcement and protection they have provided to consumers for over 130 years. The OCC has limited experience in protecting consumers who are victims of predatory lending. The State Attorneys Generals have the experience and staff to confront unscrupulous lenders and protect consumers, especially African Americans, Latinos and other low income persons who face this problem quite often."
Congressman Meeks said: "The two-tiered banking system, which I support, should not be an excuse to limit the State's ability to protect consumers from predatory or otherwise unscrupulous actions on the part of financial institutions. The State Attorney General and the Securities and Exchange Commission have already demonstrated how you can have successful cooperation between the State and the Federal government when they jointly addressed improper practices in the securities industry. This cooperation is even more critical when it comes to the banking system which so many more consumers come in contact with as well as being the instruments through which the nation conducts monetary policy."
Congresswoman Carolyn B. Maloney said: "This is a fundamental issue of state sovereignty. It is totally inappropriate for a heavy-handed federal agency to overrule the hard won consumer lending protections of the fifty states. Halting this preemption is a bipartisan effort in Washington. On December 1, I joined Representatives Sue Kelly (R-NY), Peter King (R-NY) and Carolyn McCarthy (D-NY) in a letter telling the OCC to refrain from issuing any federal preemption until Congress reviews the issue and signals its intent."
NAACP President Mfume said: "For the United States Office of the Comptroller of Currency to promulgate regulations that exempt national banks from consumer protection laws designed to prevent usury and other predatory lending ills is unconscionable. Predatory lending weighs more heavily on black and Latino communities because banks target ethnic minorities and the working poor. The resulting cycles of debt lead to staggering transfers of wealth from those who have not to those who already have."
AG Spitzer said: "The proposed rules would disband a regulatory system that has worked well for over 130 years. We hope that the OCC will decide to work alongside the states to ensure that the banking system in this country is one from which banks, consumers and communities can all benefit. However, if the OCC continues its misguided and wrongheaded mission to reduce the states' abilities to enforce consumer protection laws, I will not hesitate to sue."
New York State Banking Superintendent Diana L. Taylor said: "One does not necessarily have to agree with the laws as they are promulgated, but the preemption sought by the OCC is not the way to change a law. The right way is in public through the democratic process as it's set up with input from our legislators, consumer groups, advocates, individuals and affected institutions. We face a national issue. Governor Pataki and our congressional delegation, especially Congressmembers Kelly, King, Maloney and McCarthy, have led the way in decrying what the Comptroller is seeking to do."
Over the past decade, incidents of predatory lending have grown exponentially. It has been estimated that predatory lending costs American consumers over 9.1 billion dollars a year.
Predatory lenders often target poor people and individuals whose credit is damaged. These lending arrangements are often on highly disadvantaged terms, including extremely exorbitant interest rates, steep bank fees and payments for undisclosed insurance products.
Individuals and whole communities suffer the effects of predatory lending, as foreclosures and homeowner displacement lead to de-stabilization and frustrate attempts at revitalization and rehabilitation.
As a result of limited access to capital, minority groups are particularly vulnerable to predatory lending. Several published studies, including one conducted by the Center for Community Change, found that African-Americans at all income levels are three times more likely than whites to be denied loans from conventional banks. Black and Latino neighborhoods are six times more likely to rely on sub-prime lending institutions for financing, leaving them particularly vulnerable to predatory practices.
New York and other states have enacted laws to protect their citizens from predatory lending practices.
Joining the elected officials for the news conference were Bertha Lewis of ACORN, Sarah Ludwig of NEDAP and Tracy Shelton of NYPIRG, on behalf of Consumer Federation of America. Spitzer praised these groups for their continued leadership in highlighting the effects of predatory lending.
The New York officials and NAACP specifically criticized an August 5th ruling by the OCC that held that national banks do not have to comply with state predatory lending laws. The ruling, which was issued pursuant to a request by a national bank seeking an exemption from Georgia's predatory lending laws, comes at a time when our most vulnerable consumers need more protections and more advocates, not fewer.
The OCC's proposed rules have drawn bipartisan opposition from state attorneys general and state bank supervisors, as well opposition from consumer advocacy groups. These groups all view the proposals as illegal and unwarranted. Last month, all 50 attorneys general submitted comments to the OCC opposing its attempt to preempt state consumer protection laws.
The OCC's proposed rules, and its ruling exempting national banks from the Georgia predatory lending law, are part of a continuing series of recent actions taken by the OCC to shield national banks from state consumer protection laws. The OCC has repeatedly intervened in litigation against national banks, asserting its position that the banks are exempt from state laws and state law enforcement.
On several occasions, the OCC defended the banks against actions taken against them or their subsidiaries by states attorneys general. In fact, late last year the OCC issued an advisory letter to national banks advising them that they are not subject to state enforcement and directing them to "consult with the OCC if state officials contact them concerning the potential application of state law, or . . . seek information concerning a national bank's operations."
The OCC, which supervises its banks through routine audits for safety and soundness, has relatively little experience in investigating banks for compliance with consumer laws. For years, states have enforced state and federal consumer protection laws against national banks with good results, while the OCC has devoted the majority of its time and resources to monitoring the safety and soundness of its institutions. Without the states' continued efforts to protect consumers, the OCC will be burdened with the duty of undertaking a role they have long neglected and one for which they may not be well-suited.
OCC's legislation received wide criticism from the consumer advocacy groups that were present at the news conference:
Bertha Lewis of ACORN, said: "For us the most important thing is making sure there is a way to protect poor people and borrowers from predatory lending and abusive loans. We do not think the OCC does provide, or can provide, adequate protection. If these lenders are all exempted from any state oversight the problem is going to get worse."
Sarah Ludwig of NEDAP, said: "The OCC's preemption of state consumer protection laws for national banks is a transparent power grab, in the service of some of the largest financial corporations in the world. We cannot allow the OCC in its arrogance to gut our strong, hard-won state laws that protect
New Yorkers from being gouged by high cost and predatory financial services."
Tracy Shelton of NYPIRG, on behalf of the CFA, said: "Predatory mortgage lending poses a real and severe threat to the economic well-being of consumers and communities across New York. Preemption takes state consumer protections off the table at a time when they are needed to confront abusive lending that threatens to strip wealth from lower income and minority communities."