The Center for Responsible Lending submits these comments urging the FDIC to reject the petition to issue rules preempting state laws as applied to state banks engaging in interstate activities.
The Center for Responsible Lending is a non-profit organization focused on policy research and advocacy to stop predatory lending practices. We are an affiliate of Self-Help, one of the nation's largest nonprofit community development lenders, whose mission is to create and protect ownership opportunities for low-wealth families through home and small business ownership. Self-Help has provided $3.8 billion in financing to help over 30,000 low-wealth borrowers buy homes, build businesses and strengthen community resources. Additionally, our affiliate Self-Help Credit Union maintains deposit accounts for individuals, nonprofit and religious organizations, and foundations. Our organization was instrumental in helping to pass North Carolina's comprehensive state statute against predatory mortgage lending, the country's first, and has been a leader on legislative and regulatory efforts to address predatory lending issues nationally.
Summary Our comments urge the FDIC to reject the request to issue rules preempting state laws as applied to the interstate operations and activities of state-chartered banks. The comments address the general and specific issues posed by the FDIC's request for comments. In sum, the comments argue:
Given the dramatic impact this petition would have on the dual banking system and fundamental principles of comity among states – for good or for ill -- the FDIC should not engage in a rulemaking process absent a clear directive from Congress. Neither the history of our dual banking system nor recent Congressional actions support a broad preemption of state banking law by state-chartered financial institutions.
The arguments presented by Petitioners consist of a selective and out-of-context reading of recent Congressional actions. The FDIC should reject the cobbled-together argument advanced by the Petitioners, especially given the current policy debate as to whether even recent OCC preemptive rules reflect Congressional intent.
Without the institutional authority and capacity to effectively protect consumers from abusive loan products proliferating in the alternative financial services market, the FDIC should resist the temptation to displace state-level enforcement mechanisms, thereby transforming itself into the primary regulator for all insured state banks and their affiliates and contractual partners. Pursuant to the Federal Deposit Insurance Act, the FDIC must rely on the States to regulate the activities of state banks and their business associates, and to protect consumers from unfair or abusive lending practices. Its authority to authorize banking activities is limited. Unlike the OCC, the FDIC's primary role is to protect the deposit insurance fund from insolvency, chiefly through the promotion and enforcement of sound banking practices. The FDIC should hew to this role and decline the Petitioners request for rulemaking.
CRL's comments expand upon these points.
The Center for Responsible Lending
Yolanda D. McGill
Senior Policy Counsel