[Congressional Record Volume 141, Number 2 (Thursday, January 5, 1995)]
[Senate]
[Pages S520-S521]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


              INTERSTATE BANKING AND BRANCHING ACT OF 1994

 Mr. BENNETT. Mr. President, last year we worked hard to 
ensure, after careful consideration by the Senate Banking Committee, 
the Senate, and the conference committee, that banks providing credit 
to out-of-State borrowers would be unaffected by other changes made in 
the new interstate banking and branching law. We considered the 
interests of the States, financial institutions, and regulators, and 
consumers on this very important point.
  Unfortunately, and notwithstanding the care we took with the words we 
used, it has come to my attention that a recent court decision has 
misinterpreted several provisions of the interstate banking law. I want 
to set the record straight so that there is no confusion or 
misunderstanding.
  Mr. Chairman, the intermediate appellate court in Pennsylvania issued 
its decision on December 14, 1994, in the so-called Mazaika case. In a 
6-3 decision, the court held that a national bank located in Ohio was 
not authorized by section 85 of the National Bank Act to collect 
certain credit card charges from Pennsylvania residents--charges that 
the court acknowledged to be lawful in Ohio. Mr. Chairman, every other 
final decision by other courts on the merits of this very question has 
concluded that such charges were authorized by section 85 to be 
collected from all borrowers, anywhere in the Nation, as long as they 
were legal in the bank's home State.
  In its decision, the majority noted the enactment of the Riegle-Neal 
Interstate Banking and Branching Act of 1994 and said that the 
interstate banking law ``expressly provides that a national bank is 
bound, as to operations carried on in a particular State, by the 
consumer protection laws of each State in which it operates any 
branches.'' The majority was referring to the applicable law provision 
of the interstate law.
  Mr. Chairman, it is my view that the Mazaika majority made several 
mistakes in its reference to the applicable law provision of the 
interstate banking law. These matters should be clarified.
  First, the applicable law provision in the interstate law applies 
only and by its terms when a bank actually has branches in a second 
State. And even in such circumstances, the applicable law provision 
subjects the interstate branch of a bank to certain State laws only 
where those laws are not preempted by Federal law. This provision has 
no bearing on or relevance to the Mazaika case because, in that case, 
no branching by the Ohio bank into Pennsylvania is involved. Moreover, 
the law has long been settled by the courts that section 85 is 
preemptive.
  Second, the Mazaika majority simply ignored the very important 
savings clause in the interstate law. The savings clause is part of 
section 111 of the interstate law. Mr. Chairman, I well recall that 
this provision was included in the Senate bill at the request of the 
Senator from Delaware for two reasons. The clause makes clear that a 
branch of a bank in one State may charge interest allowed by that 
State's laws in making loans to borrowers in another State even if the 
bank has branched interstate into the borrowers' State. In addition, 
the Senate Banking Committee and the Senate very much wanted this 
provision in the law in order to ensure that a bank's ability to 
collect all lending charges had not been affected by other provisions 
of the interstate law--such as the applicable law provision.
  The savings clause provides that nothing in the interstate law 
affects section 85 of the National Bank Act and also section 27 of the 
Federal Deposit Insurance Act, which relates to charges by State banks. 
The savings clause therefore preserves the preexisting lending 
authority of banks to collect all lending charges in accordance with 
home State law, without regard to the changes in branching authority 
made by the interstate law.
  Does the Senator agree with my understandings that the majority in 
Mazaika seriously misconstrued the interstate banking legislation?
  Mr. ROTH. Yes, I most certainly do, and I agree that it is very 
important to confirm these points.
  At the Senate Banking Committee, I requested, and the Managers' 
Amendment included, the savings clause. The savings clause, as I have 
previously stated, made clear that the adoption of interstate banking 
legislation will not and was not intended to affect the existing 
authority with respect to any charges imposed by national and state 
banks for extensions of credit from out-of-state offices.
  The Senate Banking Committee report and the conference report both 
contain explanatory language that is consistent with this reading of 
the interstate law. The reports state that, as a result of the savings 
clause, nothing in the interstate banking law affects existing 
authorities with respect to any charges under section 85 of the 
National Bank Act or section 27 of the Federal Deposit Insurance Act 
that are assessed by banks for loans made to borrowers outside the 
State where the bank or branch making the loan is located.
  I took to the floor of this Chamber on September 13, 1994, to 
reemphasize these important points.
  I very much agree with the Senator from Utah that the majority in 
Mazaika misread and seriously misconstrued the interstate banking 
legislation. I hope our discussion today clarifies these matters.
  Mr. BENNETT. Mr. Chairman, I also wish to set the record straight 
about another provision in the interstate banking law. Section 114 
establishes a 
[[Page S521]] new procedure concerning when the Federal banking 
agencies issue interpretive rulings or opinion letters that preempt 
certain State laws. I have learned that some are arguing that section 
114 and its legislative history somehow overrule, or cast doubt upon, 
interpretations of the word ``interest'' by the OCC, the FDIC, and the 
OTS. These interpretations have been repeatedly cited by many courts.
  Mr. Chairman, it is my interpretation that nothing in section 114 or 
the legislative history of the interstate banking law overrules, or 
casts doubt upon, these prior interpretive letters issued by the 
Federal banking agencies. The savings clause in section 111 makes this 
abundantly clear. Indeed, it is my understanding that section 114 
addresses only procedural matters, and was not intended to alter or 
establish any principles of substantive law.
  May I ask the Senator from Delaware whether he agrees with my 
interpretation?
  Mr. ROTH. I do.
  

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