The Preemption Debate Gets Hotter
In the wake of issuing a rule that clarifies and explains the federal preemption of state banking laws, including consumer protection, the OCC finds itself under fire from a wide variety of sources. All that the preemption rule actually does is clarify existing law. The regulation issued by the OCC explains how and when federal preemption will apply to state laws. In short, it adds clarity to the question of preemption and saves all parties a great deal of trouble - such as going to court to get answers.
The rule is under attack as though it had suddenly been made up from whole cloth. The attacks are uninformed but energetic. USA Today, for example, ran an editorial criticizing the OCC for using federal powers to preempt what it said were stronger state laws. The newspaper also claimed, in the same editorial, that states are better equipped to enforce their laws whereas federal regulators have limited staffs and other agendas.
The USA Today editorial, like many others, was based on opinion more than information. But it will be more widely read than the OCC's careful explanations of its rule. It contained no information about the fact that most of the predatory lenders are under state supervision exclusively. It also made no reference to the fact that some state consumer protection laws, such as Georgia's, were actually having the result of making credit unavailable on any terms, predatory or fair.
What becomes clear in the objections to the OCC rule is that the real debate is not actually about consumer protection; it is about power and who is in charge. The states and consumer groups both lose power when the OCC preempts the field.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 2, 3/04
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