|For Immediate Release
|January 16, 2004
||Contact: Cheryl Weiss
Federal Regulator Preempts States Laws and Threatens Consumer Protections
MADISON, WI - News of the Office of Comptroller of Currency ("OCC") issuing sweeping provisions to override state laws in areas of consumer protection drew sharp criticism from Lorrie Keating Heinemann, Secretary of the Wisconsin Department of Financial Institutions.
The OCC has pushed aside state law enforcement saying that the ability to protect Wisconsin citizens is null and void if they do business with a national bank or its subsidiaries.
"This proposal is bad for consumers and bad for our economy," said Keating Heinemann. "The scandals and consumer abuses exposed by the state regulators in the mutual fund industry provides a recent example of how a single regulator from Washington DC cannot and should not be the only regulator of our financial markets.
"This also raises public policy questions of whether one federal regulatory agency can and should be preempting laws that were lawfully enacted by our state legislature to protect Wisconsin citizens."
Democrat and Republican legislators from across the country, the National Governor's Association, the National Association of Attorney Generals and all 50 state banking regulators, have voiced opposition to this proposal.
"This blanket preemption of state laws and state oversight severely weakens the ability of states to respond to consumer's economic needs. The potential impact of the OCC's proposal on the banking system and consumers is enormous."
This new rule would prevent state regulators from enforcing consumer protection laws against subsidiaries of national banks such as finance companies, mortgage brokers and check cashing outlets. These entities had been subject to state regulations but may no longer be subject to any state consumer protection laws.
The OCC rule concentrates regulatory power in the hands of a single individual, the Comptroller, with no direct congressional oversight until problems or scandals emerge.
In the end, it is Wisconsin citizens who lose. "For example, in 2003, we entered into a settlement with Household Finance that resulted in over $5 million going back to Wisconsin low-income borrowers and changed the practices of one of the major lenders in the nations," cited Keating Heinemann. "Under the new rule, we may not be able to do this again."