|Predatory lending: Who's watching your back?|
|By Laura Bruce
There's a turf
war waging between federal and state regulators, and the nation's consumers may
be the losers.
It's centered, in part, on whether nationally chartered banks should
have to abide by state laws targeting predatory lenders. But it
could mean that the amount of protection you get against those lenders
will be reduced.
If your credit is less than stellar and you want to buy a house,
you may end up with a subprime mortgage. You'll pay a higher interest
rate than someone with top-notch credit. That's fair; the lender
gets a little extra for taking the added risk of lending money to
someone with shakier credit.
But the legitimate subprime lending industry has been infiltrated
by unscrupulous companies that make predatory loans geared to keeping
you in hock to them forever.
The national Home Owners Equity Protection
Act is meant to protect homeowners from predatory lenders. But many states say
HOEPA doesn't go far enough and have enacted their own regulations.
The Office of Comptroller of the Currency charters, regulates and
oversees national banks -- banks that have federal charters as opposed
to state charters. The OCC says it supervises some 1,900 national
banks nationwide. Easily identifiable by the word national in their
bank titles or the letters NA or NT&SA after them, national
banks represent about 28 percent of all insured commercial banks
in the United States, or 57 percent of the total assets of the banking
The OCC started the fracas when it announced that it's too difficult
for national banks to follow different anti-predatory lending regulations
in each state in which they operate. Therefore, national banks need
only adhere to national regulations. In essence, the OCC said national
rules against predatory lending will pre-empt state rules when it
comes to national banks.
States that have enacted their
own anti-predatory lending regulations howled.
"The OCC's actions are a thinly disguised attempt to shield
national banks from important state consumer protection laws and
to entice state-chartered banks to obtain a national charter and
seek the immunity that the OCC is offering," said New York
attorney general Eliot Spitzer in a December 2003 statement.
"The OCC", says Spitzer, "cannot, by adm`inistrative
fiat, take away protections to which New York consumers have always
been entitled, nor can it take away states' powers to enforce long-standing
In an August 2005 statement,
Spitzer reiterated the same sentiment: "The OCC's effort to shield national
banks from vigorous enforcement of New York's civil rights laws is shameful and
indefensible," he says. "The OCC should be encouraging efforts to obtain
compliance with civil rights laws, not blocking those efforts."
OCC has a different take. Kevin Mukri, OCC director for press relations, says
the OCC is not overstepping its jurisdiction.
"We're talking consumer choices,"
says Mukri. "If a consumer chooses to be a member of the national
banking system, they know the protection they'll get. On our Web
site, we have the rules, the protections and actions the OCC
has taken. We feel it gives very strong protection to consumers.
It doesn't matter whether you're in California or New York, or anywhere
in between, the same thing applies."