NASCUS Urges Congressional Oversight Of OCC Preemption Rule to "Protect Principles of Dual Chartering System"

ARLINGTON, VA. – Noting that NASCUS, as a matter of policy, doesn’t take public positions on issues that only affect the commercial banking industry, NASCUS Chairman Roger Little, Michigan Deputy Commissioner, Credit Union Division, Office of Insurance and Financial Services notified in writing the House Financial Services Subcommittee on Oversight and Investigations of NASCUS’ “grave concern” for federal preemption of state law and regulation of financial institutions and the “significant damage” that “may be done to the principles of the dual chartering system for depository institutions and to the dual charter system for state chartered credit unions and their millions of members” unless Congress intervenes in the oversight of the OCC preemption rules. “We are concerned about the `contagion impact’ on the credit union dual chartering system if the powers of the state banking regulators were significantly curtailed by these actions of the Office of the Comptroller of the Currency,” Little wrote. “Recent regulations of the OCC will have a broad impact on the dual chartering system for commercial banks and could open the door to similar actions by the federal credit union regulator, the National Credit Union Administration (NCUA) unless Congress intervenes to rein in additional federal preemption powers that the OCC now intends to implement,” he continued. Little noted that the National Governors Association, the National Association of Attorney’s General, the National Conference of State Legislatures, the Conference of State Bank Supervisors, and several consumer groups, have expressed similar concerns over the issue of expanding federal preemptions of state laws and regulations. Concerning to what extent additional federal banking powers should be granted the OCC, Little said that is an important matter for those who support the dual chartering system for all depository institutions. “It is a matter of such importance that the Congress should resolve such conflicts rather than delegating this fundamental issue to the federal financial institutions regulators to determine.” States, wrote Little, “have long served as `laboratories for experimentation’ in the financial services business.In the case of credit unions, almost all innovations in new powers were initiated by the states, and later imitated by the federal credit union regulator after successful experience in the state sector. In this way, the dual chartering system for both commercial banks and credit unions has provided our economy with two very effective financial engines that drive our nation’s economic change and growth. “.But now, when the issue becomes one of consumer protection, some are demanding that the federal banking authorities preempt state consumer protection initiatives in the name of establishing an exclusive national standard for regulating almost all aspects of consumer lending,” Little stated. “NASCUS is not comfortable with such federal rulemaking. What the OCC has adopted would override state law and concentrate regulatory power at the federal level,” he said. Little warned that, the OCC preemption rule, if left unchanged, “would create an uneven playing field for state chartered financial institutions and for customers of state chartered depository institutions.” In addition, “if the states are obliterated as laboratories for consumer protection and other forms of beneficial financial experimentation, we will lose a fundamental characteristic of our dual chartering system.” Lastly, “if the OCC rules remain unchallenged, they may serve as an incentive or `roadmap’ for the regulators of other federal depository institutions.the OCC rule is not an academic regulatory issue that only affects a few parties. There are more than 45 million members of state-chartered credit unions who could lose protections afforded them under state law and regulation if federal preemption of state law and regulation continues untrammeled.” Little concluded to make clear that, “Our overriding concern is that state credit union regulators and state chartered credit unions and their members may find our dual chartering system threatened by the same preemption issues that have galvanized state chartered banks, state banking supervisors, and other representatives of state government to seek legislative relief from this Subcommittee.” -