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January 15, 2003
The Honorable John D. Hawke, Jr.
Comptroller
Office of the Comptroller of the Currency
250 E Street, SW
Washington, DC 20219
Dear Mr. Hawke:
We have been advised that your agency is drafting a predatory
lending regulation designed to preempt existing state
anti-predatory lending statutes and regulations for national
banks. CSBS would oppose such an initiative. Preemption of this
order would undermine efforts by state legislatures and state
banking agencies to protect citizens from bad actors that have
systematically targeted less informed borrowers using misleading
and fraudulent lending practices that have decimated communities
across the country ? replacing home ownership with massive
foreclosures.
To protect borrowers from practices such as lending for the
purpose of obtaining collateral, ?packing? and other practices
associated with predatory lending, many state legislatures have
passed meaningful, deterring legislation. CSBS believes that such
statutes apply to national banks under the Riegle-Neal Interstate
Banking and Branching Efficiency Act, passed by Congress in 1994.
Riegle-Neal specifically provides that national banks must comply
with the ?laws of the host State regarding community
investment, consumer protection, fair lending and the
establishment of intrastate branches? [12 U.S.C. §36(f)].
It is our view that a predatory lending regulation that seeks to
preempt state predatory lending statutes would run counter to
Congressional intent and would erode existing measures that
protect consumers. CSBS also questions the authority to enact such
sweeping preemption that appears to be neither supported in
federal statute nor supported by Congress.
Additionally, it is our understanding that a national bank?s
subsidiaries and affiliates are examined for consumer protection
and safety and soundness if the subsidiary or affiliate amounts to
a material part of the national bank?s overall operation or
materially impacts the risk profile of the institution. While CSBS
applauds the use of ?risk-focused? supervision, what protection
would consumers have from potential predatory lending practices(1)
if: (1) the OCC does not examine a mortgage lending subsidiary or
affiliate because it is deemed to be a relatively small component
of the national bank?s overall operation, (2) preempts existing
state predatory lending statutes and (3) also prevents state
officials from either licensing or investigating complaints
arising from the mortgage lending subsidiary or affiliate?
CSBS strongly urges the OCC to reconsider any sweeping predatory
lending regulation intended to preempt existing state consumer
protection statutes and regulations. Additionally, due to the
Federalism implications of such a proposal, CSBS asks to be
consulted as any such regulation is developed or considered.
Thank for your attention to this matter. We look forward to
working with you and please feel free to contact me with any
questions.
Best Personal Regards,
Neil Milner
President and CEO
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[1] The Office of the
Comptroller of the Currency recently released Advisory Letter
2002-9 that directs state officials to communicate with the OCC
directly, and not national banks or their affiliates. The OCC has
also challenged the ability of state officials to license
subsidiaries or affiliates of national banks. |
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