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House Financial Services Chairman Michael Oxley (R-OH) sided with the Office of the Comptroller of the Currency Jan. 28, saying it had authority to rush into publication a new rule preempting state consumer protection laws.

"In my view, the OCC regulations represent a thoughtful attempt to codify and harmonize past legal precedents, and there are many, and regulatory guidance into a coherent framework for resolving conflicts between federal and state laws as they apply to national banks," he said in his opening statement at a hearing called by Rep. Sue Kelly (R-NY), chairwoman of the oversight and investigations subcommittee.

Kelly said she wanted the OCC "to publicly justify its decision to finalize these rules prior to congressional review."

Kelly said she had written OCC on Dec. 1 asking it delay the rules until Congress could hold hearings to review them and determine whether Congress intended for the regulator of national banks to have authority effectively to prevent a state from determining and enforcing its own consumer protection laws.

"Unfortunately, this is not the first time that Congress has had difficulty working with the OCC, which indicates to me that there may be larger systemic problems at the agency," she said in her opening statement.

"Congress must, and will, take all necessary steps to ensure that the interests of the American people come first - even if it means a 'culture of change' at the OCC."

Nevertheless, Oxley's statement effectively halted any future committee action on the issue, allowing the rule to take effect as scheduled Feb. 12.

State banking regulators, attorneys general and consumer advocates opposed the rule.

Iowa Attorney General Thomas J. Miller told the subcommittee all of the nation's attorneys general agreed with his comments regarding the preemption rule so the issue was "not a partisan issue, which depends upon one's political philosophy about the proper role of government in regulating business.

"It is a basic question of federalism, and a basic question of whether fundamental, critical decisions about where the proper balance of federalism lies are made by elected, accountable legislators, or by bureaucratic fiat."

He said the rules were "an effort to take the National Bank Act to a place where Congress has yet to specifically decide it should go - to uniform federal standards that virtually eliminate the traditional role of the states in enacting and enforcing consumer protection laws."

New York Superintendent of Banks Diana Taylor spoke on behalf of the Conference of State Bank Supervisors in opposing the new rules.

"The OCC's new regulations usurp the powers of the Congress, stifle state efforts to protect their citizens, and threaten not only the dual banking system but also public confidence in our financial services industry," she said.

"This debate should not be about protecting or advancing one charter over another. It should be about creating the best structure for a financial services system that allows a wide range of financial institutions to compete effectively and make their products and services available to all segments of our nation, and that offers consumers protection and remedies against fraudulent and misleading practices - no matter the charter of the consumers' financial institution,

"If Congress finds that federal preemption is necessary to achieve this goal, we will accept that. With his actions, however, the Comptroller of the Currency is trying to cut off this discussion altogether."

OCC Chief Counsel Julie Williams told the subcommittee the rule does not authorize new powers for national banks but was based on federal law, judicial precedent and the Constitution.

She said the rules were necessary because of the "imposition of an overlay of 50 state and an indeterminate number of local standards and requirements on top of the federal requirements."

In addition, she said, "the federal preemption standards that form the basis of our regulations are so well developed, and have been so consistently applied by the federal courts over time in an extensive body of judicial precedent, that exclusive reliance on a case-by-case approach is no longer warranted."

She said the rules had been developed over a two-year period during which time House and Senate members had been briefed and consulted.
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Publication:Liability & Insurance Week
Date:Feb 2, 2004

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