U.S. Urged to Back State Lending Laws

A coalition of civil rights and consumer groups urged a federal bank regulator Monday to withdraw its plan to exempt national banks and their subsidiaries from state anti-predatory lending laws.

A number of states have enacted statutes to combat lenders who target high-cost loans to so-called sub-prime borrowers, typically minority, elderly and low-income homeowners.

The U.S. Office of the Comptroller of the Currency this year said national banks and their lending arms should be exempt from these state lending laws, arguing that banks with a nationwide charter should not be subject to state banking statutes.

Monday was the deadline for the public to submit comments about the proposed preemption.

“We believe this proposal to be fundamentally flawed both in its assessment of the impact of state anti-predatory lending laws and as to the powers Congress entrusted to the OCC,” the coalition said in a letter calling for the agency to rescind its proposal. The coalition includes the Assn. of Community Organizations for Reform Now and the National Assn. for the Advancement of Colored People.

The lending industry says the state lending laws impose excessive legal burdens on lenders and investors, and could result in fewer loans made to people who need them most.

But the groups cited studies that found no evidence of a decline in loans made to sub-prime borrowers after a state’s anti-predatory law went into effect.

The issue of federal authority overriding state and local consumer protection laws has surfaced repeatedly across the country in recent years. In California cases, federal courts have exempted national banks from local and state laws limiting automated teller machine fees, restricting certain mortgage interest charges and requiring broader interest rate disclosures by credit card issuers.

When California Atty. Gen. Bill Lockyer became president of the National Assn. of Attorneys General in June, he announced a campaign against federal preemption efforts.

OCC head John Hawke said state and local officials were trying “to make political hay by attacking national banks” despite “185 years of federal rulings in favor of a unified system of nationally chartered banks.”