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OCC Vies for Top Billing as Policeman for National Banks

Over the past few years, state agencies have been active in enforcing laws that protect consumers against predatory lending, yet the Office of the Comptroller of the Currency still maintains it should have the final say when it comes to supervising and regulating national banks and their subsidiaries, according to Raymond Natter, deputy chief counsel for OCC.

Last week, Mr. Natter joined individuals from both sides of the issue to discuss federal vs. state-charter pre-emption, a topic that has made recurring headlines in the press and before Congress. The panel session was part of the Strategic Research Institute's conference, "Broadening Opportunities with the Banking Charter."

"State law cannot interfere with a national bank's power to do business," Mr. Natter said. "State supervisors cannot use discovery in the court system to get employee records and loan files from national banks. That is pre-empted."

Like the speakers who followed Mr. Natter, "choice" was the one word that was reiterated from the panel. "A charter decision should not be based on pre-emption but on the quality of supervision," he said. "New York State has one of the best supervisors of financial institutions. A state charter is a good option here. For many, a national bank will not be the correct charter."

The OCC issued its final pre-emption rule in February stating that state laws do not apply to national banks or its subsidiary if they "obstruct, impair, or condition" a national bank's powers dealing with lending, deposit taking and other national bank activities. The rule also clarified what the OCC calls its "exclusive visitorial authority" over the content and conduct of national bank activities authorized under federal law.

According to the OCC, laws that regulate loan terms, require state licenses, or impose conditions on deposit or credit relationships do not apply to national banks and are pre-empted by federal law. Under the rule, state laws that deal with taxation or zoning are not pre-empted by federal law.

Historically, Congress has declared that states have an interest in protecting consumers from deceptive acts of national banks, said John Ryan, executive vice president of the Conference of State Bank Supervisors, which represents 50 attorneys general who have joined together to object OCC's "visitorial powers" or reinterpretation of the National Bank Act.

Mr. Ryan stressed the importance of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. The act, which extended OCC jurisdiction, was adopted to permit national banks to operate interstate branches, but it did not alter the balance or weaken the state's authority to protect the interests of consumers.

"Riegle-Neal equaled the playing field," he said. "Now, the OCC's proposal is in direct conflict with interstate banking. The 'visitorial' rights are dangerous, because it takes away the enforcement authority the states' believed they had regarding national banks and their subsidiaries, which are not national banks in our eyes."

"Local accountability - we see that lacking from the OCC proposal. Congress needs to revisit the regulatory structure," Mr. Ryan said.

Sara Kelsey, general counsel for the New York State Banking Department, also expressed concern over allowing OCC to be the lone regulator of national banks' operating subsidiaries.

"The law prior to the OCC rule was not perfect," she said. "But the great thing about America is that we have choices. Banks have the ability to choose the charter and regime that works best for them. Right now, we're grappling with the questions of how to reconcile federal and state laws. Pushing out local enforcement is not the answer. This is a broader financial services issue."

Predatory lending is still not federally regulated, Ms. Kelsey said.

Some states have better anti-predatory lending laws than others, while some really do impede on a lender's ability to do business, she said.

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