Federal Deposit
Insurance Corporation

Inner City Press/Community on the Move
 

From: Matthew Lee [at] innercitypress.org [mailto:mlee@innercitypress.org]
Sent: Tuesday, December 13, 2005 8:06 PM
To: Comments
Cc: State-offices@fairfinancewatch.org
Subject: Re: RIN 3064-AC95 -- Opposition to FDIC proposal to preempt state consumer protection laws

December 13, 2005

By email to comments@fdic.gov

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, D.C. 20429

Re: RIN 3064-AC95

Dear Mr. Feldman:

On behalf of Inner City Press / Community on the Move and its members
and affiliates (collectively, “ICP”), this is a timely comment urging
the FDIC to withdraw and not enact your proposal to preempt state
consumer protection laws for state non-member banks.

Inner City Press / Fair Finance Watch, drilling deeper into the 2004
HMDA data, keeps coming upon problematic FDIC-supervised lenders, as
simply three examples, all inter-state:

Synovus Mortgage Corp (which in Alabama in 2004, for all HMDA-reported
first lien loans, confined African Americans 6.77 times more frequently
than whites to higher cost loans over the federally defined rate spread
of 3% over comparable Treasury securities on first liens, 5% on
subordinate liens);

RBS’ Citizens Bank(s), and Citizens Mortgage Corp. (which in
Pennsylvania in 2004 confined African Americans four times more
frequently than whites to higher cost loans over the federally defined
rate spread of 3% over comparable Treasury securities on first liens, 5%
on subordinate liens);

Fulton Bank (which also in Pennsylvania in 2004 on lower volume
confined African Americans 3.84 times more frequently than whites to
higher cost loans over the federally defined rate spread of 3% over
comparable Treasury securities on first liens, 5% on subordinate liens),
and regarding which, see ”Group challenges Howard bank buyer: Fulton
accused of bias against minorities,” Baltimore Sun, November 22, 2005,

Of your proposal, the National Mortgage News of October 31, 2005,
reported: “The controversial proposal, approved by the FDIC board of
directors on a 3-2 vote… would allow state banks to comply with their
home state laws when branching interstate to the same extent as national
banks.  In other words, an out-of-state bank would only have to comply
with host state laws when a national bank has to comply with host state
laws."

While we understand that the industry’s Financial Services Roundtable
has petitioned you for this, and that you claim this is only “keeping up
with the OCC,” we oppose this race to the bottom.  The FDIC should join
with others in seeking to reign in the OCC's out of control preemption
drive (akin to the drive against CRA at the OTS under its previous
director James Gilleran), rather than following the OCC in this attack
on state consumer protection laws. And while the Conference of State
Banking Supervisors may support this proposal because, short-sightedly,
they believe it will maintain some banks with state charters (because
they will be able to preempt just like national banks), the principle of
accountability to the consumer protection laws of the state a lender is
in is a more important one, the dismissal of which by CSBS is
anti-consumer.

ICP joins in the comments of the National Community Reinvestment
Coalition, of which ICP is a member, and on whose board of directors the
undersigned serves.  Your proposal would strip states of their power to
enforce and enact meaningful consumer protections for its citizens. The
implications of your request are profound. Your proposal would allow
FDIC-chartered banks to skirt strong consumer protection laws in states
in which they make loans and follow weaker laws of the state in which
they are headquartered. If the FDIC enacts this proposal,
state-chartered banks will be tempted to place their headquarters in
states with weak laws and then “export” these laws to other states in
which they make loans. The end result would be a regulatory race to the
bottom and the stripping away of states rights, leaving consumers
without strong protections against predatory lenders.

A recent Federal Reserve study of the new 2004 HMDA data confirmed two
NCRC (and several ICP) reports, which found that people of color
continue to pay more for loans as they are more likely to receive high
cost loans than whites. With these possibilities of price discrimination
and steering, the new HMDA data suggests that predatory lending is a
widespread problem and that states must have the authority to clamp down
on predatory practices. In addition, in the last year federal regulators
have been chipping away at important consumer protections. Now is not
the time to weaken laws for state-chartered banks. Ultimately, this
proposal will further undermine the gains American communities and
consumers have made in community development and wealth building.

ICP strongly urges you to drop your proposal and to remind
state-chartered banks that they have a moral and civic responsibility to
respect the will and the rights of the states to protect its citizens.
Thank you for your consideration of these comments.

Sincerely,

Matthew Lee, Esq., Executive Director
Inner City Press / Fair Finance Watch
Regular mail: PO Box 580188, Mt Carmel Sta., Bronx NY 10458
Tel: 718-716-3540 - Fax: 718-583-5204
Sender’s email: MLee@innercitypress.org