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Home > News & Events > Conferences & Events > Public Hearing on Preemption Petition

Public Hearing on the Financial Services Roundtable's Petition For Rulemaking to Preempt Certain State Laws
May 24, 2005

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Panel 4

DIRECTOR CURRY: Good afternoon. It's my pleasure to open up Panel 4. I'd like to start with the testimony of Ms. Elizabeth Renuart. Ms. Renuart.

MS. RENUART: Thank you, Director. Also, again, thanks everyone here for granting our request to come and testify for us and having the hearing. I really appreciate this opportunity to speak.

I'm with the National Consumer Law Center in Boston, Massachusetts, and we provide a number of advocacy and legal research and writing work on behalf of primarily low-income consumers in the United States. That's where we're coming from and that's our perspective.

I wanted to start out by talking about really not the state of the dual banking system, which is what everyone has focused on up till now, but actually the state of the credit marketplace. From consumers' perspective, that's the more important global way to look at this problem, I think, than just whether the national banks are stronger than the state banks and whether the state banks are going to retain their viability, but we should be looking at the credit marketplace as an entire unit to see what is the state of that marketplace, how has preemption -- not just this preemption that we're talking about today -- but preemption generally affected that marketplace.

I've spent probably more than half of our written comments talking about the state of the credit marketplace. I'm not going to go into the same detail now as I did then but I wanted to point out some of the highlights, or lowlights as it were, of what's going on in the marketplace that relate to the various types of preemption that have been codified either by statute with Congress or through Supreme Court decisions or most recently as described earlier administrative fiat through the Office of Thrift Supervision and the Comptroller of the Currency.

On the credit card side, there's been, as everyone probably in the room knows from reading the newspaper, a lot of documentation over the last few years of abuses in the credit card industry not just towards low-income clients, not just towards minority borrowers, or other people, so called disadvantaged consumers, but generally the enormous amount of profit from fees, charges, interests, and so forth that have occurred because of preemption due to the Marquette decision originally due to the Smiley decision regarding late fees, and then the OCC's interpretation of what constitutes interest codified in its federal regulation.

On the mortgage side, the news is not very good as well for consumers, which is what led Congress in 1994 to look at the scene quite seriously and pass the Home Ownership and Equity Protection Act, which is really the only federal consumer protection statute that deals directly with mortgage loans and purports to regulate in some way the terms of those mortgage loans.

However, that Act only applies to very high cost mortgage transactions and so other transactions that fall below the radar screen of the Homeownership and Equity Protection Act continue to persist and our written materials as well as a variety of sources that I cite there describe what's going on in the mortgage marketplace for consumers, again as a result of or relating to -- maybe not the only result -- but relating to the passage by Congress of the Alternative Mortgage Transactions Parity Act as well as the Depository Deregulation and Monetary Control Act in the early 1980s.

Those Acts directly have been one of the causes for the abuses, which is why the OTS, to its credit, revoked part of its regulations and now permits states to regulate prepayment penalties again, which it had prohibited for a period of time pursuant to its regulations.

In the small loan arena -- and Ms. McGill will also be addressing this as well so I'll just briefly mention the rise of payday lending and the involvement of both national banks and state charter banks to circumvent consumer protections and usury caps in state laws.

The absence of small loans being made by banks has also given rise to the increase now in auto title loans, refund anticipation loans; bounce loans, which now banks are getting into under the guise of calling them overdraft protection plans.

There's a variety of ways that banks either through their direct activity or the absence of their willingness to lend in certain arenas has helped create a report card for the marketplace that is not very good.

That ties together with my concern about what the roundtable's requesting the FDIC to do or at least as far as we can discern at this point in time without more particulars and the relationship of consumer protection laws to the extent they still exist at the state level and to the extent they exist at the federal level -- the relationship of that preemption to what's going to happen for consumers.

Some practical reasons that I would urge the FDIC and the members here to think about in terms of whether to take the petition any further, deny it, or give it additional thought, and that is essentially there's a variety of scenarios that have been talked about already as to what might happen, or race to the bottom, whose laws will apply and who can enforce those laws.

There is a variety of scenarios that could result, in my view, none of them positive. One scenario would be that a few or a handful of states' laws control what happens to consumers in all the rest of the states. That's basically sister state preemption, and there are some grave concerns expressed in the written comments.

I believe Ms. McGill will talk about this as well as to actually the constitutionality of that sister state preemption doctrine so to speak. Another one is that there will be further migration to those states that have deregulated themselves.

This whole discussion I think should also look at the concept of deregulation at the same time as preemption has been occurring. They've worked together not only to affirmatively trump state laws but also put a great deal of pressure on the states to deregulate themselves. So it's not like every single state has wonderful consumer protection laws that apply to their citizens.

Of course that's why some banks have migrated to certain states because of that lack of regulation, for example Delaware and South Dakota, or laws of many states could still apply because what I understand, and I maybe I misunderstand, but what I understand the petitioners to be requesting is that the law of the home state will apply.

They're not asking you to apply federal law or federal standards. They're asking you to apply somebody else's state law to the activities of that particular institution as it goes out to other states. While there will be a uniform infrastructure for that particular bank, there's not going to be one national standard under that scenario by which all banks operate.

The national banks and the federal savings associations will operate under their federal set of laws but these state charter banks, under nobody's scenario that I've heard, are going to operate under one federal legal infrastructure. It's going to be the infrastructure and the state laws of the home state.

Citizens in one state could be subject to banking laws and consumer protection laws or the lack of them of a variety of other states in which they don't live because that's who they happen to be doing business with or their choices may be reduced, and they may not have that many choices in terms of who they do business with.

From the consumer's perspective it's not going to create a level playing field or a level legal infrastructure. It's going to make it perhaps even more diverse in terms of whose law applies then presently.

Another problem with what the roundtable is seeking is what we witness with the OCC and what's going on there as well as the OTS. We shouldn't leave, in my view, the OTS off the hook because they started this in 1996, and the OCC basically, when it adopted its 2004 regs, said in there one of its reasons for doing so or one of its bases of authority was the OTS had done it.

It's the me too approach, which now the roundtable is asking the FDIC to also take the me too approach for state charter banks. A major problem, and the main problem in my view, for consumers is that the absence of protections in one state law -- let's say the home state law -- as applied around the country if there's not something in that state law, the FDIC does not have the authority to create a consumer protection code that would fill that gap.

We can see that quite clearly with the OCC. The only two parts of its regulations that relate to consumer protections are the part that requires an ability to repay standard and the provision that says the FTC Act applies.

Beyond that, there are no consumer protections in federal law other than separate federal statutes which Congress has enacted and which I'll talk about in a minute. The default is the contract, and that's no law at all because the default is the bank enters into a contract with a customer and if there's no law prohibiting, requiring, or dealing with particular provisions in the contract it can be whatever the parties agree to.

As we all know, at least in the consumer context -- not in the commercial context but in the consumer context -- that's whatever the lender decides it should be because consumers rarely have the ability negotiating those terms or to strike them out or to change them or even have the understanding or ability intellectually to know what's going on in order to do that.

The final problem I wanted to address up front in terms of the practical effect is who really is the regulator here. Now there's a dual system, the FDIC is the secondary regulator, the state banking superintendents or commissioners are the primary regulator, and if you go down this road and decide that the home state would apply -- in other words applying the Riegle-Neal Act to activities rather than just to branches as it's been described -- then is the home state regulator going to be able to enforce it, assuming the home state has consumer protections, enforce those consumer protections against the bank when it's engaging in activities in far flung states?

If enforcement issues become very difficult, would the FDIC have any role in supervising that in terms of its safety and soundness powers to make sure that state laws are enforced? Then if so, then the FDIC as well as the host states have to become familiar with the home state's law of all the other 50 states.

It gets -- I mean I'm confused even talking about it -- so you can see, I think, I hope, why it would be confusing to regulators to try to unravel this. You're going to need a three dimensional chart, I think, to figure out where you go for X, Y, and Z.

It gets actually more complicated in my view, than simple, which is one of the reasons why it's being offered. I think the simplicity is not really there. I did want to address, because of what I saw earlier in the morning, in my view is somewhat blanket assumption that the FDIC has the authority to do what's being asked of it.

I did want to spend just a few minutes -- I think I have a few more minutes -- parsing a little bit of the statutes. One is the Riegle-Neal Act. As mentioned earlier, it applies to branching. It doesn't apply to activities. However much the roundtable or anyone else in this room wishes it were different, that's not what the language says.

We cannot say that there's a gap in it. There's simply no intent by Congress to permit what's being asked. For that reason, I think Riegle-Neal has no applicability here beyond its terms, which is to give state charter banks the ability to apply the law of their home state in instances in which national banks could do so as well in the branching context and not outside of the branching context.

In addition, the Riegle-Neal Act reaffirmed -- Riegle-Neal II that is -- reaffirmed in the bill itself the ability of states to opt out of Section 27 of the FDIA. Section 27 as you know is the most favored lender provision in terms of interest rate and interest rate exportation. So Congress in 1997, well after the opt-out provision was enacted back in 1980, reaffirmed the ability of states to opt out.

This whole balloon can be popped by states saying, "oops we're going to opt out at any time," because there's no deadline on when they're allowed to opt out, which is further evidence of Congress' intent that there not be broad preemption, federal preemption granted to state chartered banks because otherwise the opt out provision becomes a nullity.

Gramm-Leach-Bliley Act is being, in my view, again used in a way that Congress didn't intend and the words don't say. The particular provision that's being relied upon by the roundtable and others deals with non-discrimination between depositories and non-depositories.

It doesn't deal with discrimination amongst depository institutions so all it says is -- it actually says state laws apply except to the extent that they discriminate in the ways that are described. If the discrimination is between depositories and non-depositories, I venture you would not find state laws that discriminate in that way, that say banks have to do something but finance companies don't have to do something or vice versa.

In fact as I mentioned in my written comments, generally the states favor banks and exempt banks from some of their, for example, usury provisions and other consumer protection type provisions and they have more favored status than do finance companies and other types of state regulated entities, mortgage brokers, etc.

For that reason I don't see Gramm-Leach-Bliley by its terms or by its intent to come close to what the round table suggests that it's supposed to be doing, nor does it give the authority to the FDIC.

Lastly, Section 1818, which is Section 8, and Section 1819 has been provided to you as a way of looking at additional authority. Section 1818 -- the provisions that their cited deal with termination of insurance and simply say that if insured depository institutions that violated any applicable law -- and that's the part that's quoted, but not the rest -- applicable law regulation order condition imposed in writing by the corporation or in a written agreement entered into then you can terminate the insurance after you give notice.

That's all that Section 8 talks about. It doesn't talk about general authority to enact preemption regulations. Then Section 1819, which are the corporate powers for the FDIC -- I know I'm speaking to the choir here but these are just points that I haven't heard made earlier -- and that is yes you have the authority to prescribe rules and regulations as you deem necessary to carry out the provisions of this chapter or any other law which it has the responsibility of administering and enforcing.

There's nothing in the Gramm-Leach-Bliley Act that says the FDIC has any authority to administer or enforce that act because, of course, since Riegle-Neal is within the FDIA you would have the authority there if it applied outside of the branching context, which we suggest it does not.

For those reasons and a variety of others that I have in my written comments -- and I stop here and not take up more time -- I would ask the FDIC to deny the petition. Consumers have been losing on this preemption train that's going forward and since its beginning in 1978, and from my perspective I only see that this would be another loss for consumers primarily because if you go forward and enact a preemption regulation -- and assume that I'm wrong, that you do have the authority to do that -- and you do it, you cannot -- you do not have the authority to enact a consumer protection statute that would create minimum standards by which the states could then go higher.

If you don't do them in tandem, it's worse off for consumers than it has been. The evidence is in that the marketplace is not working for many consumers at the moment. Thank you.

DIRECTOR CURRY: Thank you, Ms. Renuart. Commissioner Turnbaugh?

COMMISSIONER TURNBAUGH: Thank you, Director Curry. I want to thank the FDIC for making this hearing available. I think it's very important to get the issue of preemption in front of the public and the more attention that can be brought to the delivery of consumer credit in the United States in general I think is very worthwhile.

I'd also want to compliment the National Consumer Law Center and the material that is put together. They and I agree that we would sit down and be part of the same panel because I feel that our positions on this issue are generally the same.

I've also been asked to call your attention to a letter to the secretary signed by the banking commissioners of seven northeastern states that also generally agree with my testimony. I think you have that as part of the record. The content of the letter differs somewhat from my positions, but they wanted me to tell you that they too oppose your taking action in regard to the petition of the roundtable.

I am what's called the Commissioner of Financial Regulations, State of Maryland. For the State of Maryland I regulate not only banks but also most of the other financial services players with the exception of securities and insurance, so that I'm concerned about mortgage brokers, mortgage lenders, consumer finance companies, sales finance companies, banks, and yes, even credit unions, in addition to money cashers, money transmitters and so forth.

So, banking is not my only interest, but over all of that my principal goal, my principal responsibility and my principal desire is to protect the consumers of the State of Maryland and to try to assure that there is a way to deliver financial services under which the institutions that provide those services can prosper and which are also fair to the consuming public.

Now I'm relatively new in this position. I have only been commissioner for about two years. This is the first time I have worked for a governmental agency since I was in the military as a JAG officer during the Vietnam War. So, it's been a long hiatus.

During that hiatus I spent most of my career with large financial institutions helping them take advantage of developing uniform consumer credit products or managing legal department for a multi-state consumer finance company, so that I feel I know what lending institutions need in which to prosper.

Some of that has been mentioned already by other people that testified. They need a certain amount of certainty as to what the rules are. You will hear from large financial institutions that operate on a multi-state basis that we really don't care so much what the rules are as long as they are the same and we can offer a uniform product in Texas and Arkansas and Pennsylvania.

It is extremely expensive to go to the trouble of researching all those states and so forth. Well, that makes a very good argument, and I generally agree with that. However, I started off in the consumer finance industry pre-computer. I have gray hair.

I ran a legal department whose job was to review the law of 40 states and make sure that all the consumer credit products that offered in those states from sales finance to direct loan to mortgage, etc. were compliant with state law. So, if I could do that with a decent legal department pre-computer, I don't think it's gotten more difficult with computer.

But let's assume that state legislatures make mistakes periodically. Once upon a time it was in the Arkansas Constitution there could be no consumer credit extended in the State of Arkansas with an interest rate of greater than 10 percent. That caused tremendous difficulty when the prime was at 21.

But the Arkansas Supreme Court recognized the problem of that constitutional provision, and all around the borders of Arkansas there were finance companies and banks ready and willing to loan Arkansas consumers money at far more than 10 percent, and my company was right there with them.

We need clarity, certainty, uniform rules help a great deal, and regional restrictions on interest rates. The seven banks' superintendents from the northeastern United States really favor going back to the old rules where it was the state legislators' responsibility to pass the credit rules that were applicable to their citizens.

That has been the tradition in the United States for a long, long time and has only been attacked and overturned within approximately the last ten years, Marquette and Smiley were the key decisions. I worked for Citibank when the Smiley case came down and recall how pleased the institution was that it had been clarified that there could be this clarity.

I ask you that before you take any action in regard to this petition that you find and look at a show called Frontline concerning the secret history of credit card. I found it very, very interesting. I knew several of the people that were there. I listened to the interview of then Governor Jankalow in South Dakota.

Basically South Dakota was in very difficult straits and they traded with Citibank. We will give you a credit card statute under which you can do whatever you please across the country if you will simply come here and employee thousands of our customers.

When I left Citibank, Citibank was the largest non-governmental employer in the State of South Dakota. The largest non-governmental employer in the State of Delaware is also a credit card institution. The fact that these states traded a no-rules credit code for economic development for their state has paid off very well for them.

The City of Wilmington would be a ghost town were it not for the credit card industry, so I understand the rationale for the adoption of the no-rules credit code, especially in Delaware. I am more familiar with the Delaware code than the South Dakota code. I have the Delaware code right here in my hand, the banking code.

It is in two parts. Basically it's a revolving credit statute, and it's a fixed bank closed end credit bank revolving credit. They are essentially the same. There are no rules except that any term that you want the customer to abide by you have to put that term in the agreement.

That's why you get solicitations like this from a major, reputable financial institution that on the front page it says zero fixed introductory APR, 7.99 fixed APR thereafter. Sounds reasonable. Sounds very good really. But then on the back it says we reserve the right to change the interest rate at any time for any reason.

So, if you can change the interest rate at any time for any reason, how is it a fixed rate? Then this solicitation, which is very common to others I have here, also carry default rates, the zero that would go to 7.99. The default rate would be 29, 25, 23 percent above prime so that a very strong default rate.

Rest assured that in this day of sophisticated credit reporting programs, the marketing people that sent out this solicitation had an extremely good idea of what the interest rate would be on the portfolio in general that responded to this solicitation. You can rest assured that a year from the credit cards becoming activated, I suspect that they thought more than half or a substantial number would not be at the 7.99.

You're hearing a lot about credit cards from this panel because credit cards are in practically every American's pocket. The terms of practically all of those credit cards are issued under the laws of Delaware or South Dakota or some other states that have adopted similar, at least, revolving credit statutes in order to keep their credit card operations locally in that state, so that North Carolina, I believe, Alabama, Nevada, and so forth under pressure adopted very liberal revolving credit statutes.

I can't tell you how many have adopted also very liberal closed end credit statute, but Delaware certainly has. So all the terms that I have talked about in regard to credit card solicitations, the ability to change the rate without the customer's consent on existing balances -- someone who moves balances to this card at 7.99, they get into a little bit of difficulty -- two days late in the payment they could be looking at 25, 29 percent.

The customer would have thought they could handle $5,000 at 7.9, now they can't handle $5,000 at 29.9 or whatever. The importance is that those terms that are now in the credit card operation can readily migrate into the sub prime mortgage loan operation or the prime mortgage loan operation or the direct automobile operation.

There is a reason why many financial institutions in this country are relocating their mortgage and automobile programs to the State of Delaware, under either directly through a national bank or under a subsidiary of a national bank because they know that they can use the credit card program as a model for their automobile credit or their mortgage credit.

Now all this is advantageous to national banks. That's why we're here. We feel that the state bank has been placed at a high competitive disadvantage, but since I'm concerned about the consumer also, I tell you that it's the consumer that is really taking in the ear under the existing consumer credit statutory framework that we have in the United States.

People talk about federal preemption and we talked to a Congressman -- he is inclined to favor federal preemption. He thinks that he has done something to create federal preemption. What we have today is not federal preemption. It is one state's law being allowed to preempt another state's law. That one state law that is gone to for preemption purposes generally created that law for economic development.

No-rules replaces Maryland law, replaces Wisconsin law, replaces Georgia law, etc. I submit to you, having worked with state legislatures and Congress, first that there is nothing more offensive to a state regulator than to understand that his law is not being preempted by federal law, his law is being preempted by Delaware law.

He doesn't understand why the Delaware legislature should be passing laws that affect the credit given to Maryland residents. Congressmen also do not understand the federal preemption issue. They just don't -- the American public doesn't understand it, Congress doesn't understand it as these kinds of sessions are gone through.

As the nature of federal preemption and the lack of consumer protections available in the market place and how they are being expanded into other resources becomes knowledgeable. The natural reaction of Congress is to fix it.

That's why these seven state regulators say that unless we can go back to the way it used to be where the state legislatures controlled, then we need a uniform standard. That standard should not come from you, should not come from the OCC, it should be passed by Congress.

I firmly believe that if Congress acted, they would produce a statutory credit code under which credit granting institutions could thrive and yet would offer basic consumer protections to the consumers. I value the dual banking system. I think these days you have a dual banking system the advantages are the same advantage as basically why you have a House of Representative and a Senate.

A unicameral legislature you don't have balance in a -- when you have a monopolistic regulator you're not going to have balance. Although most banking assets in Maryland are in national banks, by far the largest number of banks in Maryland are state banks.

It has been a long time since a bank that was going to operate in Maryland was chartered de novo, new, from anyone but the state regulator. Entrepreneurial groups in Maryland, when they want to charter a bank, look at all the options and they end up coming with the state regulator.

They can come to Baltimore and see me. They know that we want them to succeed, not that we're not going to put them out of business in the right circumstance, but they feel that we're going to be more apathetic and we're available and closer -- oh and by the way, we are cheaper.

That's not lost on entrepreneurial groups either. Of course, my office is not in glorious quarters such as these. I guess I'm running out of time, but my counsel and my review of the law, having been in consumer credit counsel and legislative counsel for long time, I too have the same reservations about your basic ability to adopt and implement the petition as the NCLC.

The banks that are encouraging you to adopt this position are going to be sadly mistaken if they think they're going to get clarity out of any result. If you have the authority, and I don't think you do to do this, it is going to be clear that you have -- it is less clear -- let me back up for a minute.

I just lost a case in federal district court in Maryland over the opsub issue and we will now appeal to the Fourth Circuit. I have severe questions, after being in the industry for 30 plus years as counsel one way or the other, the OCC has the authority to do what they have done.

I think it's clear that the federal appellate courts, and maybe the Supreme Court, will resolve that issue down the road. If you adopt the petition, it's going to be in litigation for five or six years. My recommendation to you on behalf of the citizens of Maryland and the banks that are regulated and the non-banks that are regulated is pass on this.

It's in the interest of shortness of life. Recommend to Congress that they address this, let Congress come up with a uniform federal standard under which lending institutions can thrive, all lending institutions, state, national, and non-depository, and yet protects the consumer.

That's the way this issue has to be resolved. Thank you very much.

DIRECTOR CURRY: Thank you, Commissioner Turnbaugh. Mr. Taylor?

MR. TAYLOR: Director Curry and other representatives of the FDIC, first I do want to thank the chairman and the FDIC as a whole for conducting these hearings. I appreciate the opportunity to testify.

NCRC, the National Community Reinvestment Coalition, represents nearly 600 local community organizations ranges from churches to community development organizations, local governments, and others who hold a common believe, namely that fair and equal access to credit capital and basic banking services should be accessible to all hardworking Americans.

Limiting the competitive financial services sector to middle and upper income wides and having working class Americans subjected to more expensive, onerous, and sometimes predatory lending practices are an anathema to our democratic society.

Mr. Director, we at the National Community Reinvestment Coalition hold a fundamental principle to be true, that all citizens willing to work hard, pay their taxes, defend our nation, and overall maintain their commitment to be good and decent citizens deserve the right to have all our institutions treat them in a fair and equitable manner.

Unfortunately, overwhelming evidence that is clear and incontrovertible shows that too many American taxpayers are victims of unscrupulous and greedy lenders that practice what has become known throughout the land as predatory lending. Our recent analysis of the new HMDA pricing data reveals persistent and stubborn fair lending disparities by race and gender.

Further, our also recent credit scoring study called the Broken Credit System shows that even controlling for credit scores people of color and the elderly are more likely to receive high cost loans. I'd like to submit both of these studies to the record if I may.


MR. TAYLOR: I don't know who I hand them to but I'll ?- this disparate treatment has happened under the watch of this and the prior administration. Our national leaders have moved insufficiently to stem the tide of this despicable and un-American activity. Instead, like Nero while Rome burned, we fiddle about the impossibility of defining predatory lending.

Mr. Chairman, I am not here to offer the legal arguments of whether the exercise of your authority is defensible under the law. Several of my colleagues have made just such arguments opposing further federal preemption of state laws. I would urge you to carefully consider the testimony of the National Consumer Law Center, the Banking Commission of Mississippi, and the Commissioner of Financial Regulation of Maryland.

Instead, I am here to leave a placeholder in history to remind people of the poor judgment and lack of common sense showed by the OCC and hopefully not the FDIC. When America was faced with a crisis of such immense importance as predatory lending, states have acted where Congress has not, where the White House and its appointed officials have failed to do so.

They have moved to protect the citizens within their borders and pass laws that prohibit these despicable activities known as predatory lending. Members of the FDIC homeowners have become homeowners because they have acted responsibly, worked hard, saved, and pursued their version of the American Dream of owning a home.

They have worked to provide for the families, to keep them safe and warm, and now come the crooks in business suits armed with sweet talk and financial mumbo jumbo and empowered by the laws that allow them to gorge profits and strip equity from the elderly, the less educated, the unsuspecting, and other good citizens.

Finally, finally Congress is acting to address this national problem. Two bills are now in Congress, Ney-Kanjorski and the Miller-Watt-Frank bills, both designed to fight predatory lending. This is true in great part because of the success of many of the state elected leaders who have moved to address this problem.

Many lenders are how supporting national legislation in order to create uniformity of compliance across state lines. Remove the application of these laws through preemption actually removes some of the industry driven incentive to promote a national standard.

As to which or when one of these bills would pass is anyone's guess. But what is not open to speculation is that predatory lending, if unchecked, will continue and many citizens will remain at risk. The OCC has effectively undermined this effort by declaring that their banks need not conform to these state-created protections.

We urge the FDIC to show the common sense and commitment to the American taxpayer that is most needed at this juncture. This is not simply a matter of jurisdiction. This is a matter of responsibility. Republican and Democratic state leaders have acted because they recognize citizens under their protection are in jeopardy from predatory lenders.

What the OCC has failed to see is the significance of this problem and the real impact that it will have on people, the very same people that they are charged with protecting. We implore you to have the wisdom and the courage to not undermine the existing state laws that protect consumers and to remain patient as our elected officials in Washington mirror the foresight and responsibility showed by many of our state leaders.

Homeowners are not looking for a handout or even a hand up, but rather simply evenhandedness in their financial transactions. The federal banking laws in our country allow most of the predatory lending practices to go unchecked.

American homeowners depend upon Congress and the White House to protect their homes and families from crooks, and they rely upon the appointed officials to not just to bate the strict interpretation of the law but to use reasonable and common sense in the application of those laws.

In closing, we hope the FDIC will show their common sense as well as their commitment to being responsible for protecting American homeowners by not undermining the anti-predatory lending protections of the states and by demonstrating patience as Congress works to address this problem by creating a national standard.

We ask you to reject the roundtable's petition. I also would ask that the other written remarks that I've supplied be entered into the record.

DIRECTOR CURRY: Thank you, Mr. Taylor.

MR. TAYLOR: Thank you.


MS. McGILL: Good afternoon. Thank you, Director Curry and other hearing officers here at the FDIC. It's a pleasure to be here. My name is Yolanda McGill, and I'm here speaking on behalf of the Center for Responsible Lending. We're based in Durham, North Carolina.

CRL is affiliate of the Self Help Credit Union. We are a rather large credit union but a rather small financial institution in the grand scheme of things, but we've been around for 25 years. Over the last 25 years we provided about $3.5 billion worth of financing and served about 41,000 borrowers, mainly in the home mortgage area. We also do small business loans.

We have a mission of building and preserving wealth in underserved, low-income communities. I am an attorney, but I'm not a banking lawyer. I'm probably newer to the practice of law than most other people here, so I just want to put that as a disclaimer. I do specialize in debt and credit issues.

At CRL I spend all of my time focused on non-mortgage credit products, so a lot of my -- panels here, panels have alluded to credit card issues and that type of thing, so I spend all of my time looking at pay loans, refund anticipation loans, that type of thing. I prepared talking points, but I say that I re-did them based on testimony earlier, so pardon me if they're a little disjointed, I kind of started from scratch.

I'm going to touch on three general themes that I feel are important to raise based on the petition and also what I heard earlier today. The first thing that I'd like to talk about that no one else has necessarily touched on is the breadth of petitioner's request that was in the--.

Then the second point would be the lack of authority as far as we're concerned to promulgate rules applicable to breadth, the players included in the petition, and also the scope of activities covered by the petition.

Then finally I would like to talk about and my co-panelists have touched on this as well, real abuses versus potential abuses. There's been a discussion about the raise of the bottom and our earlier testimony seem to be talking about these abuses in a theoretical context, and I'd like to kind of talk about what we see for real happening today.

I would like to note first off that the testimony I've heard so far -- those who've supported the petition seem to be in favor of parity for banks or for banks and their branches or for banks and their operating subs.

However, no one's spoken to the concern that was foremost in my mind here -- and again thinking about the context of the work that I do everyday -- when I read the petition was that it seems the petitioner's request would extend preemptive privilege beyond the bank and beyond the bank's branch or even its sub to any other person with which the bank does business.

Of course this is based on petitioner's interpretation of authority under Riegle-Neal and Gramm-Leach-Bliley. This intent seems to be expressed in the language of the petition but also implicit in the request for parity with national banks given the OCC's broad preemption opinions with respect to bank activities conducted out of state, particularly vis-à-vis a non-bank agent.

What comes to mind, at least when I have read the petition, what came to mind was the OCC's preemptive determination with respect to the Michigan car dealership. The OCC came to a conflict with the Michigan state regulator who sought to enforce its retail installment sales acts against a car dealership and the OCC thought that that was interfering with the banking powers of the national bank which was providing loan financing through this car agent.

More later on that on why I find that disturbing. In my second theme -- everyone here so far has expressed concern with the OCC's overreaching preemption determinations and CRL is included in that number, and we've commented on that in the past.

The concerns in the determinations relate to the extension of national bank preemption to opsubs and to licensing requirements and to non-traditional banking activities and the like. So now quarrel as we may with the OCCs aggressive approach, they can at least point to some legal support in their favor.

We can look at their history, the fact -- the reason for their creation and their role as charter and overseer of federal banks and also the exclusive visatorial powers that the OCC does enjoy over those banks and also the broad set of enumerated powers set forth in the National Bank Act, especially 24-7th.

Finally, the supremacy of federal law over state law. The FDIC on the other hand is in a different situation. Created as an insurance fund to safeguard the vitality of our banking system, which is a fine, fine thing, granted concurrent visatorial authority over the insured banks, and also lacking some of the expressed provisions that the national bank regulator has such as 24-7th and the express enumerated powers.

So, it seems that we're lacking the authority to supplant state law applicable to the banks unless it was expressly provided for.

So the issue for me here is -- and this is -- again, I'm new to this arena, not a banking lawyer, but -- it wasn't clear to me where there is actually authority for the FDIC to promulgate rules to extend application of federal law or home state law vis-à-vis federal law to -- these facades, the insured state banks and their branches.

If the FDIC could do that, then could that preemption cover anything besides what's expressly covered by Section 27, the interest rate exportation. I would have to note that Section 27, it seems, cannot be that the basis for the authority to extend preemption beyond the insured state bank because even national banks don't rely exclusively on Section 85.

So, to say that Section 27 could do it for state banks would actually make Section 27 broader than Section 85 is for national banks. National banks rely on the exportation in 85 as well as the incidental powers in 24-7 in order to conduct their activities vis-à-vis non-bank agents.

Bringing me to my third point, non-bank agents. Earlier testimony glossed over the petitioner's inclusion of this any other persons that the banks do business with, but I'd have to say that that is an area where the FDIC should pay very careful attention, and I believe that is the area that is the most ripe for abuse.

There's been discussion already about credit card banks and that type of thing. I really feel like this is an area -- and I'm going to talk about payday lending here because I think that that is something that is a real abuse, a real example of the race to the bottom as opposed to the theoretical possibility of the race to the bottom.

This is something that I deal with every day. Through CRL's website and various listservs and a very wide coalition that we have made up of industry analysts and financial professionals and private and public attorneys -- we see all manner of innovative credit options, many of which are not offered by banks. They are non-bank providers and most of which are not necessarily beneficial for consumers or even functioning as they are marketed to be.

This would include debt consolidation products, Internet catalog sales, opportunities to pay down your mortgage in half the time if you pay through a trust or some other thing, cash advances against your post-dated check. We've seen them marketed as fee free for the first time you come in or 50 percent off if you bring in a friend.

I mean the contracts for deed where instead of entering into a mortgage you enter into a normal contract for your deed, so if you breach your contract under regular contract law you lose the property even if it's 15, 20 years into the contract.

They're very innovative, very creative, and I really feel that the petitioner's request could result in the extension of preemptive privilege and banking privilege to these non-bank entities vis-à-vis a contractual relationship with the state bank.

They're any other person that the bank may or may not decide to do business with. The bottom is real, in other words. The bottom is something that we see every day and we do not think that it is in line with the FDIC's role as insurer and promoter of safety and soundness to attempt to expand preemption for state banks in a manner that would encourage these banks to engage in practices and in partnerships that might be lucrative in the short term.

Again, going to the payday lending context, this is again the real race to the bottom because currently Georgia, as has come up several times as one of the laboratories for innovation, has decided to crack down on payday lending in that state.

It is their authority and their right to do so, but the payday lenders challenge that, that statute is in litigation right now, and they challenge it based on the authority they think is in Section 27 for a state bank to enter into an arrangement with a payday lender and to thereby allow that payday lender to make loans in a state contrary to that state's law.

They say that federal law is on their side. The state obviously says that state law controls. So, again, this is a problem. It's a lack of clarity. We understand the need for clarity, however, we don't think that granting petitioner's request would work in the benefit of consumers or work in the benefit of states who are trying to control predatory practices that are real, that are not theoretical.

In sum, I guess I would like to say that the -- we really think that it must be avoided to allow banks to get into things that might be lucrative in the short term, fast profits and the avoidance of pesky regulatory issues around branching but detrimental to consumers and by extension to the economic vitality of communities in the mid and the long term.

Instead, we would hope that the FDIC would support state efforts as they continue in their primary roles as caldrons for innovation and as effective regulators and enforcers. So this can only occur when it is clear to whom state banks and any other person with whom the bank might do business are accountable when they do business with consumers in a given state, and the answer should be that they should be accountable to that given state.

So, thank you very much for allowing me to testify.

DIRECTORY CURRY: Thank you, Ms. McGill. I have one question that any and all of the panelists could answer at your discretion. Earlier this morning in testimony by the representative of the working group [Mr. Muckenfuss] it was suggested that the issue of the race to the bottom could be dealt with through the rule making process itself.

My question is, do you agree with that proposition, and if so, what would you recommend to us to put in that type of regulatory mechanism for dealing with this race to the bottom?

MS. RENUART: I would be happy to start off if the other panelists don't mind. The answer that we received I think was along the lines of some type of mechanism to prevent charter switching, and I'm not -- I haven't had time to process whether that's a viable approach, but my initial sense is that's either not possible to do to prevent a bank from switching charters or it's not likely to cure the concern.

I think from my perspective the only way to prevent a race to the bottom is to create federal consumer protection code that would run with the land so to speak. Run with the bank. Run with the lender no matter where they do business. I wish it were so that the FDIC had the authority to create that as part of this process, but I don't see that authority.

I'd be happy to be persuaded otherwise, but from my perspective these two ideas, the preemption and the consumer protection standards, as a minimum standard at the federal level, are intricately connected. If we separate them, consumers are going to be losing worse than they are now in the credit marketplace.

I'm sorry, I don't have a particular way to help out with the answer to that question except that the consumer protections have to be in place in one place where they will apply to everyone, if the FDIC decides to go down this route. That's the best way to prevent the race to the bottom. I just don't know how that can be accomplished without Congressional authority.

I just wanted to say one other thing related to that which is everyone today has been saying take action, take action. My response to this is yes you can take action. I support your action.

Action can be not to grant the petition but to continue to discuss this, get a working group together of various representatives to have continuing discussion and then make recommendations to Congress and actively and aggressively push those recommendations to Congress.

That's a form of action, just as much as granting the petition or denying the petition would be.

DIRECTOR CURRY: Commissioner?

COMMISSIONER TURNBAUGH: Whatever authority you have I don't think is as extensive as the OCC has in regard to national banking. The OCC has not pretended that they have the authority to issue anything similar to a Consumer Credit Code. They have relied on their power to enforce the Federal Trade Commission Act and take action against unfair, misleading, and deceptive practices.

Of course the largest credit industry they have is the credit card industry and they must recognize that even the most, what I would call egregious, terms are not subject to being unfair, misleading, and deceptive if they're clearly written in the contract, clearly disclosed to the customer, and advertised in the peak.

Disclosure is not the answer, and I don't think you, the FDIC, or the OCC has the authority to change laws of a no-rule state. I don't see a way that the race to the bottom would be stopped because every one of these bank executives have a fiduciary obligation to their shareholders, as does their board, to operate the institution in a safe, sound, but highly profitable way.

If I were the chairman of Marshall Iisley I would say if I want to do a multi-state consumer credit program, I'd put -- and you issued this regulation -- I'd create a state bank in Delaware and I might process it out of Wisconsin, but I'd use that Delaware code because that's where I can get the greatest profitability and put the customers in a position where I can squeeze them when they -- so, I also wanted to say that I've always been proud to be in the banking industry, whether it was a consumer finance company, a federal savings bank, or a national bank.

I found that people in that industry to be honest, hardworking, people that I'm proud to call friends. I feel that in part the banking industry is also a victim of the no-rules scenario because they are forced by competition, like it or not, to engage in these practices because that's where the money comes from.

Oddly enough, the success of the credit card industry, where you have three times the profitability of your regional or local bank, derives from practices that I think many of these employees and executives would rather not engage in but are forced to by politicians.


MS. McGILL: I think that a rule could help again in clarifying the scope and breadth of the authority that is there and whether or not a non-bank can avail itself of bank privileges such as they are. They could be crucial.

Again, we don't want to cycle the innovation and the creativity and accountability at the state level, but that is what we're seeing as CRL is active in many state legislators. I believe it was alluded to actually a couple of panels ago that the legislators do consider when they're thinking about passing legislation, whether or not the thing is going to be preempted, whether or not it's actually going to be effective to protect their consumers.

When there's lack of clarity on that issue, it hamstrings the state's ability to address the concerns that are being brought to them.

DIRECTOR CURRY: Thank you. Mr. Murton?

MR. MURTON: Maybe a little bit of a follow up. The decision to do nothing it's an action we could take and are you -- earlier we talked about how many banking trade groups haven't really focused on this issue. Do you think that it's likely that we'll have the right discussions taking place if the FDIC doesn't go forward with some action?

What will be the motivation -- people to focus their attention on this?

MS. RENUART: Are you asking me directly? Okay. The motivation outside of this context would be probably be to go to Congress and ask for a fix, because you stop up the toothpaste container and it squirts out some other way.

If there's that much tension building that others have described, not on this panel, the conversation is going to have to occur in a variety of ways and all the actors so far have talked about wanting to have that conversation.

Outside of this context, I am not sure who would organize it and who would be sort of the super entity that would get everybody together, so it's going to happen in small pockets, and then people are going to go individually to Congress or as trade groups to Congress to ask for relief.

Then consumer representatives will be there asking for federal consumer protections. But I ?-

MR. MURTON: Has that been happening now? Is that what I see other panelists? Is that the way the process is going to work?

MR. TAYLOR: Well certainly as it relates to the predatory lending, I think this is an issue that as much as I've said they've moved very, very slowly. I think it's risen to the level of there being more than one bill in Congress -- competing bills now -- to address that and create uniformity for the industry.

I think those bills have some legs under them. I think there's some real possibility there. I would assume, not being the bank expert either on banking law, that Congress is going to have to come to grips with creating uniformity across how the various -- whether they're federally chartered state banks, state banks, national banks, thrifts, how they operate and whether or not there's parity between what they can do and can't do, because I think by the nature of your question I think you're right.

It's not going to go away, but I don't think rules are going to make it go away. I think a law is going to make it go away.

COMMISSIONER TURNBAUGH: I think adopting a regulation would defer or interfere with Congressional action because as is the litigation -- actually the litigation with the OCC I feel is actually deterring a response in Congress as a regulation from you would deter Congress taking action.

I would recommend something very along the lines of Elizabeth that you study the situation, that you obviously make the universal conclusion known that there is a very wide disparity between the competitiveness of state banks versus large national banks.

Indeed the community national banks don't benefit from this OCC preemption largely anyway. So there has to be some way to close the gap, and I also pitch the idea that the non-depository institutions that are out there should have the same abilities to make loans to American citizens as depository institutions.

If we can somehow pull together the non-depository lenders, the state chartered banks, especially community banks, and the consumer groups to come to grips with what the essentials of a national credit code should be. I have some ideas. I don't know whether these folks agree with or not -- then you begin to really address the issue.

I don't think any of us are really saying do nothing. I think we're saying that adopting this proposal is going in the wrong direction.

MS. McGILL: What he said.



MR. KROENER: I want to pursue some of the legal issues that got raised on the panel. As general counsel of the FDIC I guess that's my role. I guess my first question is the legal analysis tends to get confused with the policy analysis as we get into the details.

What I would like to ask is if any of the panelists see a problem from a legal standpoint -- and if you're not lawyers you can pass -- but we have lots of people at the FDIC that like to help that aren't necessarily lawyers and if you want to help, you're welcome to.

Is there any reason that the FDIC lacks the legal authority to adopt a rule that recites in precisely the terms used in Riegle-Neal II, a rule that would be applicable to state banks? That is to say that says that the law in the circumstance where the Congress has said so, the law of the home state rather than the host state applies to branch activities in a host state.

MS. RENUART: I don't see why not under Section 1819.

MR. KROENER: Any others?

MS. McGILL: Branch activities meaning activities within the branch?

MR. KROENER: Using the words of the statute, which are home state law shall apply to such a branch. We'd use the words of the law. I guess my other --

MS. RENUART: Excuse me. If all you're suggesting is sort of not codifying, because that's what you do for a statute, but putting in a regulation exactly what the statute says, I don't see why the FDIC wouldn't have the authority.

You've already issued letters -- the FDIC has already issued letters adopting the OCC's definition of home state in their 822 letter. You've issued letters number 10 and 11 regarding Section 27. If you put that in a regulation I don't see why there would be any reason you couldn't do that.

MR. KROENER: Which means --

MS. RENUART: But that doesn't get us very much further from where you are today.

MR. KROENER: Depends on how you read the testimony heard earlier perhaps, but the next steps then become the more difficult steps from a legal analysis. I understand that and we pursued that this morning.

The other legal question I had, and I guess it's to Commissioner Turnbaugh and Ms. McGill. Do either of you see a constitutional problem with Riegle-Neal II, because I -- there were suggestions in the written materials and in your testimony, Commissioner, that there might be. That's the first part of the question.

The second part of the question -- if so, is it supremacy clause or equal protection clause based?

COMMISSIONER TURNBAUGH: I don't recall my testimony talking about constitutional issues here.

MR. KROENER: I understood you to question Congress' authority to substitute the law of a host state for the law of a home state. I read Riegle-Neal II to do precisely that.



COMMISSIONER TURNBAUGH: -- believe I made that comment.

MR. KROENER: Fine. I misunderstood it then. You don't see a constitutional problem with this? You don't think it's beyond the authority of Congress to do what they've done in Riegle-Neal II, whatever that is.

COMMISSIONER TURNBAUGH: I think Congress can go do far more than that if they put their mind to it.

MR. KROENER: So they have chosen, in at least some circumstances, whatever they are, to substitute the law of the home state of a banking institution for the law of the host state of an out-of-state branch of that same institution.



COMMISSIONER TURNBAUGH: We -- to the extent that it comes up in a court system, a judge in Maryland, in regard to contracts that come before him from banks in Maryland, may have to apply the law of Maryland, New York, Georgia, South Carolina, Pennsylvania, or Delaware.


COMMISSIONER TURNBAUGH: That's the way it is now. I don't think that makes a whole lot of sense, but that's the way it is now.

MR. KROENER: Okay. Then --

MS. McGILL: The situation that we were addressing in our statement, however, was if you're thinking about a petitioner's request -- again their request is rather broad and is broader than what's actually in Riegle-Neal right now, which is why we had a problem with it -- but what essentially would be happening would be a state-created but federally insured entity would be operating within a state and would be able to bring its home state law into that host state and the -- state law would be excluded completely.

That would be essentially sister state preemption and that's a different animal from your federally created, federally chartered institution coming in.

MR. KROENER: In a circumstance where the bank does not have a branch in the --

MS. McGILL: Right.


MS. McGILL: Right.

MR. KROENER: All right.

MS. McGILL: I mean that's --

MR. KROENER: All right. I understand.

MS. McGILL: -- crazy.

MR. KROENER: Thank you.

MS. McGILL: I'm sorry.

MR. TAYLOR: Can I just make a comment --


MR. TAYLOR: -- relative to your first question, because I understand as counsel that you want to focus on the legal and not mix it with the public policy issues, but I would hope that the decision makers in the FDIC would not do that because --

MR. KROENER: I'm not suggesting that the legal --


MR. KROENER: -- is the only -- and I did not suggest that in my --

MR. TAYLOR: No, you didn't.

MR. KROENER: There are both legal and policy issues here and certainly I understand your testimony that from a -- whatever a legal authority is, from a policy standpoint it would be unwise at best to go forward with this proposal as I understood your testimony.

MR. TAYLOR: You understood it.


MR. BOVENZI: My question is for anybody. If there's a way to deal with this race to the bottom, whether it's through a federal consumer protection code or whatever means, do you any of you see any benefits to the consumer in what's being proposed by the roundtable?

At least what we're hearing is there's uncertainty, which has costs associated with it. There's duplication that has costs associated with it. Presumably those costs are passed on to the consumers so -- making something more uniform and more efficient -- do you see that as benefiting the consumer, assuming we found a way to deal with the issue of race to the bottom?

MS. RENUART: Which of us would you like to have start first?

MR. BOVENZI: Whoever would like to respond is fine.

MS. RENUART: Well, I don't mean to keep jumping in first every time so give me a yank if you'd like to go first. I don't see competition in the marketplace working now for consumers, even in the national bank market, which operates presumably under this wonderful federal uniform infrastructure.

Credit card banks that are national banks -- we don't see competition in terms of interest rates. We don't see competition in terms of fees. What we see actually now is more the irrelevancy of the interest rate unless you're in default or some other provision is triggered, which then jacks up your interest rate.

We see no competition in fees. Late fees have only gone up since 1996 when Smiley was decided. All of the other fees that we highlight and talk about in our testimony have only gone up.

It's the whole idea -- this is going bring about efficiencies and reduction in costs for consumers hasn't occurred in the national bank model in a credit card context.

It's not occurring in the mortgage context to the extent that national banks and their operating subsidiaries are involved in sub-prime lending and predatory lending despite protestations from the OCC that they aren't.

Our comments highlight specific instances in which we go out to the attention of the OCC that they're banks were involved in that either directly through origination or through securitization trusts where the trustee in deriving fees from the flow of predatory mortgage loans or secure ties or they're the servicer or in whatever capacity.

I don't see that market working well enough to pass on savings to consumers to then say that creating that same situation for the state banks is going to do any better.

COMMISSIONER TURNBAUGH: I would say that consumer credit is increasingly in the hands of a smaller and smaller number of very large institutions that push the envelope to the limit. I generally feel that consumers would benefit if more lenders, more banks could operate under a uniform standard established nationally.

To me, the federal standard should -- after thinking about this for about a year and a half now -- the federal standard should contain certain prerequisites. One would be a substantial deregulation of interest rates.

There are still states around that have problems where the interest rate caps interfere with the marketplace. However, there'd be strong limits on imposition of these and other charges. There would certainly be a limitation on the ability to change rates and a limit on possibly the amount of rate change unless it's tied to an index going in.

No more doubling or tripling of the interest rate offered from the go to rates. But there should be a choice. State legislature should still be interested in passing consumer credit legislation so that the lender, through the agreement, should be able to pick whether they operate under a federal standard or under the state law where the consumer is located.

That keeps both in and also you have to -- the state regulators would have to have jurisdiction to enforce the standards in addition to the federal. We need more enforcement, not less. Generally, yes. I think consumers would potentially benefit.

MS. McGILL: To that I don't necessarily agree with some of what Commissioner Turnbaugh said, but I would like to say that my first thought when you asked your question was assuming that the savings would get passed on -- I think that's something that we acknowledge we don't see on a regular basis and that sharp practices do occur and that the credit market is a special place where you can't rely on the market to correct itself or to control.

The products are increasingly creative and disclosures don't help and there's a lot of incentive to -- for credit providers to not be upfront and to avoid certain aspects of regulation because really that's where the profit is. That's where they're going to make their money.

Any market-based solution would have to be teamed up with effective regulation and effective ability of the states to enforce that regulation. That's just the bottom line.

MR. BOVENZI: Thank you.


MR. ZAMORSKI: I think at least two of the panelists mentioned an alternative to a petition is to Congressionally pass a consumer credit protection regulation. I'm not sure if everyone means the same thing when they say that. I take it to mean a comprehensive set of protections against unfair and deceptive practices.

I also get the impression that some may advocate some sort of national usury standard or something. What do the panelists mean when they talk about these regulations? You started probably in your answer to John's question to talk about, Mr. Turnbaugh, to talk about maybe some of your points on this.

COMMISSIONER TURNBAUGH: I recommend that you turn to a state law that has been around a while, a good while, and under which the industry has prospered but yet consumers have been protected and a code that comes to mind as a model, simply a model -- it would have to be modified -- is the Uniform Consumer Credit Code that's been adopted in about ten states.

Colorado's is an up-to-date, effective model, so people in the industry say that devil's in the details and that's obviously correct. When you're talking about some of the prerequisites of reform, one of which I think has to be substantial deregulation of interest rates, limits on fees and charges, and how you change terms of credit, etc.

You're going to have a lot of pro and a lot of con so it -- but the -- we have examples out there that have worked, and if applied on a national basis so that every lender could operate in that fashion, in a uniform fashion, then I don't -- I think it's doable.

It just has to take some time and effort and parties willing to compromise and work for the common good.

MS. RENUART: I think that's a fair statement. I don't necessarily agree with every aspect, but again the devil's in the details, but I think that the -- we're willing to sit down to try to hash those out along with other consumer organizations and other industry as well as state regulators.

COMMISSIONER TURNBAUGH: If that's the situation, the real benefit you could do is to move that process along because that's the solution.

MS. McGILL: But it seems like we're -- at least one bone of contention might be would be the idea that this standard would be a floor and that the states would still then be able to come in and address the needs of their citizens if that standard was not effective to do so.

COMMISSIONER TURNBAUGH: I see we're having differences already. The -- I feel that you have to have alternatives, state law or federal law. It is counterproductive to have a floor.

MR. TAYLOR: I think if you create a good enough federal standard that makes none of the states feel that they've lost anything by a federal standard, I think everybody's happy. That would be tough but there is a bill up there that does that -- that actually improves on the North Carolina statute.

DIRECTOR CURRY: Thank you very much. I appreciate your testimony and comments. I believe there's a break, Bill?

MR. KROENER: Yes. We will reconvene at 20 minutes of four. Fifteen minute break.

(Whereupon, the above-entitled matter went off the record at 3:23 p.m. and resumed at 3:40 p.m.)

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Last Updated 7/15/2005

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