[Congressional Record Volume 151, Number 103 (Tuesday, July 26, 2005)]
[Senate]
[Pages S8960-S8963]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CORZINE:
  S. 1502. A bill to clarify the applicability of State law to national 
banks and Federal savings associations, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. CORZINE. Mr. President, I rise today to introduce legislation, 
the Preservation of Federalism in Banking Act, to clarify the 
relationship between

[[Page S8961]]

State consumer protection laws and national banks.
  This legislation responds to a sweeping new rule issued by the Office 
of the Comptroller of the Currency, the agency that regulates national 
banks. The OCC's new rule gives the agency unprecedented authority to 
pre-empt state laws, thereby shielding national banks and their non-
bank and state-chartered bank affiliates from many important consumer 
protections. It also potentially limits the ability of states to 
enforce many related laws. The most important immediate consequence of 
the OCC rule has been the preemption of state anti-predatory lending 
laws.
  I feel strongly about the need to address predatory lending, which 
can trap people in endless cycles of debt and escalating fees. Many 
States, such as my own state of New Jersey, have enacted tough laws to 
deal with the problem. Unfortunately, the OCC's ruling substantially 
undermines these laws by regulatory fiat. That will leave many 
consumers unprotected, and it shifts too many responsibilities to a 
single agency here in Washington that is not equipped to handle them. 
After all, according to its own website, the OCC ``does not have the 
mandate to engage in consumer advocacy''.
  Although the OCC has a long and successful record of regulating for 
safety and soundness, it has little experience dealing with abusive 
local practices, such as predatory lending. Believe it or not, the OCC 
actually is proposing to handle all consumer complaints through a 
single, lightly staffed call center in Houston. This is totally 
unrealistic. Each year, State officials receive thousands of related 
complaints, which usually are very local in nature. These officials are 
at the forefront of the enforcement effort, identifying and combating 
new practices as they arise. The OCC's system simply could not fill 
this role without major changes.
  The OCC rule also raises concerns about regulatory charter 
competition, the viability of a broad range of State laws, and the 
ability of consumers and State officials to seek remedies in court. 
This concern is only reinforced by two other developments.
  First is a general counsel opinion by the Office of Thrift 
Supervision that attempts to extend federal preemption beyond a 
thrift's corporate family. That effort would nullify the application of 
state consumer protection laws over independent, third-party agents of 
federal thrifts, and is particularly threatening to state insurance and 
securities efforts.
  And second is the FDIC's consideration of a rule that would allow 
State-chartered banks the same preemptive privileges for out-of-State 
branches as those of national banks. These two recent developments only 
reinforce concerns of a ``race to the bottom'' scenario.
  The OCC rule has provoked strong opposition from governors, attorneys 
general, banking supervisors, and many consumer advocacy groups, not to 
mention the public. The OCC received over 2,600 letters in response to 
its rules, and more than 90 percent opposed them.
  The Preservation of Federalism in Banking Act is a reasonable 
response to the OCC rule. The bill will clarify that national banks 
must comply with certain state consumer protection laws, such as anti-
predatory lending laws and privacy acts.
  While the OCC has long had the statutory responsibility to regulate 
the activities of national banks, it has never denied the ability of 
States to protect their citizens. The OCC historically has used its 
authority under the National Bank Act in a reasonable way to shield 
national banks from State banking laws that intrude on the OCC's 
congressionally-granted powers. While we should continue to support the 
appropriate use of the agency's authority, it is important that we 
immediately intervene to reverse the OCC's regulatory overreach and 
prevent the agency from preemption all state consumer protection laws 
and State authority to enforce related laws.
  I ask unanimous consent that the text of the legislation be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1502

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Preservation of Federalism 
     in Banking Act''.

                        TITLE I--NATIONAL BANKS

     SEC. 101. STATE LAW PREEMPTION STANDARDS FOR NATIONAL BANKS 
                   CLARIFIED.

       (a) In General.--Chapter One of title LXII of the Revised 
     Statutes of the United States (12 U.S.C. 21 et seq.) is 
     amended by inserting after section 5136B the following new 
     section:

     ``SEC. 5136C. STATE LAW PREEMPTION STANDARDS FOR NATIONAL 
                   BANKS AND SUBSIDIARIES CLARIFIED.

       ``(a) State Consumer Laws of General Application.--
       ``(1) In general.--Notwithstanding any other provision of 
     Federal law, any consumer protection in State consumer law of 
     general application (including any law relating to unfair or 
     deceptive acts or practices, any consumer fraud law and 
     repossession, foreclosure, and collection) shall apply to any 
     national bank.
       ``(2) National bank defined.--For purposes of this section, 
     the term `national bank' includes any Federal branch 
     established in accordance with the International Banking Act 
     of 1978.
       ``(b) State Laws Related to Laws Used by National Banks for 
     Their Benefit.--When a national bank avails itself of a State 
     law for its benefit, all related consumer protections in 
     State law shall apply.
       ``(c) State Banking Laws Enacted Pursuant to Federal Law.--
       ``(1) In general.--Notwithstanding any other provision of 
     Federal law and except as provided in paragraph (2), any 
     State law that--
       ``(A) is applicable to State banks; and
       ``(B) was enacted pursuant to or in accordance with, and is 
     not inconsistent with, an Act of Congress, including the 
     Gramm-Leach-Bliley Act, the Consumer Credit Protection Act, 
     and the Real Estate Settlement Procedures Act, that 
     explicitly or by implication, permits States to exceed or 
     supplement the requirements of any comparable Federal law,
     shall apply to any national bank.
       ``(2) Exceptions.--Paragraph (1) shall not apply with 
     respect to any State law if--
       ``(A) the State law discriminates against national banks; 
     or
       ``(B) State law is inconsistent with provisions of Federal 
     law other than this title LXII, but only to the extent of the 
     inconsistency (as determined in accordance with the provision 
     of the other Federal Law).
       ``(d) State Laws Protecting Against Predatory Mortgage 
     Loans.--To the extent not otherwise addressed in this 
     section, State laws providing greater protection in high cost 
     mortgage loans, however denominated, both in coverage and 
     content, than is provided under the Truth in Lending Act 
     (including the provisions amended by the Home Ownership and 
     Equity Protection Act of 1994) shall apply to any national 
     bank.
       ``(e) Comparable Federal Regulation Required.--In relation 
     to the regulation of consumer credit and deposit 
     transactions, the Comptroller may preempt State law pursuant 
     to this title only when there is a comparable Federal 
     statute, or regulations pursuant to a Federal statute other 
     than this title, expressly governing the activity, except in 
     relation to interest pursuant to section 5197.
       ``(f) No Negative Implications for Applicability of Other 
     State Laws.--No provision of this section shall be construed 
     as altering or affecting the applicability, to national 
     banks, of any State law which is not described in this 
     section.
       ``(g) Effect of Transfer of Transaction.--A transaction 
     that is not entitled to preemption at the time of the 
     origination of the transaction does not become entitled to 
     preemption under this title by virtue of its subsequent 
     acquisition by a national bank.
       ``(h) Denial of Preemption Not a Deprivation of a Civil 
     Right.--The preemption of any provision of the law of any 
     State with respect to any national bank shall not be treated 
     as a right, privilege, or immunity for purposes of section 
     1979 of the Revised Statutes of the United States (42 U.S.C. 
     1983).
       ``(i) Definition.--For purposes of this section, the terms 
     `includes' and `including' have the same meaning as in 
     section 3(t) of the Federal Deposit Insurance Act.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     One of title LXII of the Revised Statutes of the United 
     States is amended by inserting after the item relating to 
     section 5136B the following new item:

``5136C. State law preemption standards for national banks and 
              subsidiaries clarified''.

     SEC. 102. VISITORIAL STANDARDS.

       Section 5136C of the Revised Statutes of the United States 
     (as added by section 101(a) of this Act) is amended by adding 
     at the end the following new subsections:
       ``(j) Visitorial Powers.--No provision of this title which 
     relates to visitorial powers or otherwise limits or restricts 
     the supervisory, examination, or regulatory authority to 
     which any national bank is subject shall be construed as 
     limiting or restricting the authority of any attorney general 
     (or other chief law enforcement officer) of any State to 
     bring any action in any court of appropriate jurisdiction--
       ``(1) to enforce any applicable Federal or State law, as 
     authorized by such law; or
       ``(2) on behalf of residents of such State, to enforce any 
     applicable provision of any Federal or State law against a 
     national bank, as

[[Page S8962]]

     authorized by such law, or to seek relief and recover damages 
     for such residents from any violation of any such law by any 
     national bank.
       ``(k) Enforcement Actions.--The ability of the Comptroller 
     to bring an enforcement action under this title or section 5 
     of the Federal Trade Commission Act does not preclude private 
     parties from enforcing rights granted under Federal or State 
     law in the courts.''.

     SEC. 103. CLARIFICATION OF LAW APPLICABLE TO STATE-CHARTERED 
                   NONDEPOSITORY INSTITUTION SUBSIDIARIES.

       Section 5136C of the Revised Statutes of the United States 
     (as added by section 101(a) of this Act) is amended by 
     inserting after subsection (k) (as added by section 102) the 
     following new subsection:
       ``(l) Clarification of Law Applicable to Nondepository 
     Institution Subsidiaries and Affiliates of National Banks; 
     Definitions.--
       ``(1) In general.--No provision of this title shall be 
     construed as preempting the applicability of State law to any 
     State-chartered nondepository institution, subsidiary, other 
     affiliate, or agent of a national bank.
       ``(2) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(A) Depository institution, subsidiary, affiliate.--The 
     terms `depository institution', `subsidiary', and `affiliate' 
     have the same meanings as in section 3 of the Federal Deposit 
     Insurance Act.
       ``(B) Nondepository institution.--The term `nondepository 
     institution' means any entity that is not a depository 
     institution.''.

     SEC. 104. DATA COLLECTION AND REPORTING.

       (a) Collecting and Monitoring Consumer Complaints.--
       (1) In general.--The Comptroller of the Currency shall 
     record and monitor each complaint received directly or 
     indirectly from a consumer regarding a national bank or any 
     subsidiary of a national bank and record the resolution of 
     the complaint.
       (2) Factors to be included.--In carrying out the 
     requirements of paragraph (1), the Comptroller of the 
     Currency shall include--
       (A) the date the consumer complaint was received;
       (B) the nature of the complaint;
       (C) when and how the complaint was resolved, including a 
     brief description of the extent, and the results, of the 
     investigation made by the Comptroller into the complaint, a 
     brief description of any notices given and inquiries made to 
     any other Federal or State officer or agency in the course of 
     the investigation or resolution of the complaint, a summary 
     of the enforcement action taken upon completion of the 
     investigation, and a summary of the results of subsequent 
     periodic reviews by the Comptroller of the extent and nature 
     of compliance by the national bank or subsidiary with the 
     enforcement action; and
       (D) if the complaint involves any alleged violation of a 
     State law (whether or not Federal law preempts the 
     application of such State law to such national bank) by such 
     bank, a cite to and a description of the State law that 
     formed the basis of the complaint.
       (b) Report to the Congress.--
       (1) Periodic reports required.--The Comptroller of the 
     Currency shall submit a report semi-annually to the Congress 
     on the consumer protection efforts of the Office of the 
     Comptroller of the Currency.
       (2) Contents of report.--Each report submitted under 
     paragraph (1) shall include the following:
       (A) The total number of consumer complaints received by the 
     Comptroller during the period covered by the report with 
     respect to alleged violations of consumer protection laws by 
     national banks and subsidiaries of national banks.
       (B) The total number of consumer complaints received during 
     the reporting period that are based on each of the following:
       (i) Each title of the Consumer Credit Protection Act 
     (reported as a separate aggregate number for each such 
     title).
       (ii) The Truth in Savings Act.
       (iii) The Right to Financial Privacy Act of 1978.
       (iv) The Expedited Funds Availability Act.
       (v) The Community Reinvestment Act of 1977.
       (vi) The Bank Protection Act of 1968.
       (vii) Title LXII of the Revised Statutes of the United 
     States.
       (viii) The Federal Deposit Insurance Act.
       (ix) The Real Estate Settlement Procedures Act of 1974.
       (x) The Home Mortgage Disclosure Act of 1975.
       (xi) Any other Federal law.
       (xii) State consumer protection laws (reported as a 
     separate aggregate number for each State and each State 
     consumer protection law).
       (xiii) Any other State law (reported separately for each 
     State and each State law).
       (C) A summary description of the resolution efforts by the 
     Comptroller for complaints received during the period 
     covered, including--
       (i) the average amount of time to resolve each complaint;
       (ii) the median period of time to resolve each complaint;
       (iii) the average and median time to resolve complaints in 
     each category of complaints described in each clause of 
     subparagraph (B); and
       (iv) a summary description of the longest outstanding 
     complaint during the reporting period and the reason for the 
     difficulty in resolving such complaint in a more timely 
     fashion.
       (3) Disclosure of report on occ website.--Each report 
     submitted to the Congress under this subsection shall be 
     posted, by the Comptroller of the Currency, in a timely 
     fashion and maintained on the website of the Office of the 
     Comptroller of the Currency on the World Wide Web.

                     TITLE II--SAVINGS ASSOCIATIONS

     SEC. 201. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS 
                   ASSOCIATIONS CLARIFIED.

       (a) In General.--The Home Owners' Loan Act (12 U.S.C. 1461 
     et seq.) is amended by inserting after section 5 the 
     following new section:

     ``SEC. 6. STATE LAW PREEMPTION STANDARDS FOR FEDERAL SAVINGS 
                   ASSOCIATIONS AND AFFILIATES CLARIFIED.

       ``(a) State Consumer Laws of General Application.--
     Notwithstanding any other provision of Federal law, any 
     consumer protection in State consumer law of general 
     application (including any law relating to unfair or 
     deceptive acts or practices, any consumer fraud law and 
     repossession, foreclosure, and collection) shall apply to any 
     Federal savings association.
       ``(b) State Laws Related to Laws Used by Federal Savings 
     Associations for Their Benefit.--When a Federal savings 
     association avails itself of a State law for its benefit, all 
     related consumer protections in State law shall apply.
       ``(c) State Banking or Thrift Laws Enacted Pursuant to 
     Federal Law.--
       ``(1) In general.--Notwithstanding any other provision of 
     Federal law and except as provided in paragraph (2), any 
     State law that--
       ``(A) is applicable to State savings associations (as 
     defined in section 3 of the Federal Deposit Insurance Act); 
     and
       ``(B) was enacted pursuant to or in accordance with, and is 
     not inconsistent with, an Act of Congress, including the 
     Gramm-Leach-Bliley Act, the Consumer Credit Protection Act, 
     and the Real Estate Settlement Procedures Act, that 
     explicitly or by implication, permits States to exceed or 
     supplement the requirements of any comparable Federal law,
     shall apply to any Federal savings association.
       ``(2) Exceptions.--Paragraph (1) shall not apply with 
     respect to any State law if--
       ``(A) the State law discriminates against Federal savings 
     associations; or
       ``(B) the State law is inconsistent with provisions of 
     Federal law other than this Act, but only to the extent of 
     the inconsistency (as determined in accordance with the 
     provision of the other Federal law).
       ``(d) State Laws Protecting Against Predatory Mortgage 
     Loans.--To the extent not otherwise addressed in this 
     section, State laws providing greater protection in high cost 
     mortgage loans, however denominated, both in coverage and 
     content, than is provided under the Truth in Lending Act 
     (including the provisions amended by the Home Ownership and 
     Equity Protection Act of 1994) shall apply to any Federal 
     savings association.
       ``(e) Comparable Federal Regulation Required.--In relation 
     to the regulation of consumer credit and deposit 
     transactions, the Director of the Office of Thrift 
     Supervision may preempt State law pursuant to this Act only 
     when there is a comparable Federal statute, or regulations 
     pursuant to a Federal statute other than this Act, expressly 
     governing the activity, except in relation to interest 
     pursuant to section 4(g).
       ``(f) No Negative Implications for Applicability of Other 
     State Laws.--No provision of this section shall be construed 
     as altering or affecting the applicability, to Federal 
     savings associations, of any State law which is not described 
     in this section.
       ``(g) Effect of Transfer of Transaction.--A transaction 
     that is not entitled to preemption at the time of the 
     origination of the transaction does not become entitled to 
     preemption under this Act by virtue of its subsequent 
     acquisition by a Federal savings association.
       ``(h) Denial of Preemption Not a Deprivation of a Civil 
     Right.--The preemption of any provision of the law of any 
     State with respect to any Federal savings association shall 
     not be treated as a right, privilege, or immunity for 
     purposes of section 1979 of the Revised Statutes of the 
     United States (42 U.S.C. 1983).
       ``(i) Definition.--For purposes of this section, the terms 
     `includes' and `including' have the same meaning as in 
     section 3(t) of the Federal Deposit Insurance Act.''.
       (b) Clerical Amendment.--The table of sections for the Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) is amended by 
     striking the item relating to section 6 and inserting the 
     following new item:

``6. State law preemption standards for Federal savings associations 
              and affiliates clarified''.

     SEC. 202. VISITORIAL STANDARDS.

       Section 6 of the Home Owners' Loan Act (as added by section 
     201(a) of this title) is amended by adding at the end the 
     following new subsections:
       ``(j) Visitorial Powers.--No provision of this Act shall be 
     construed as limiting or restricting the authority of any 
     attorney general (or other chief law enforcement officer) of 
     any State to bring any action in any court of appropriate 
     jurisdiction--
       ``(1) to enforce any applicable Federal or State law, as 
     authorized by such law; or
       ``(2) on behalf of residents of such State, to enforce any 
     applicable provision of any Federal or State law against a 
     Federal savings

[[Page S8963]]

     association, as authorized by such law, or to seek relief and 
     recover damages for such residents from any violation of any 
     such law by any Federal savings association.
       ``(k) Enforcement Actions.--The ability of the Director of 
     the Office of Thrift Supervision to bring an enforcement 
     action under this Act or section 5 of the Federal Trade 
     Commission Act does not preclude private parties from 
     enforcing rights granted under Federal or State law in the 
     courts.''.

     SEC. 203. CLARIFICATION OF LAW APPLICABLE TO STATE-CHARTERED 
                   NONDEPOSITORY INSTITUTION SUBSIDIARIES.

       Section 6 of the Home Owners' Loan Act (as added by section 
     201(a) of this title) is amended by inserting after 
     subsection (k) (as added by section 202) the following new 
     subsection:
       ``(l) Clarification of Law Applicable to Nondepository 
     Institution Affiliates of Federal Savings Associations.--
       ``(1) In general.--No provision of this Act shall be 
     construed as preempting the applicability of State law to any 
     State-chartered nondepository institution, subsidiary, other 
     affiliate, or agent of a Federal savings association.
       ``(2) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(A) Depository institution, subsidiary, affiliate.--The 
     terms `depository institution', `subsidiary', and `affiliate' 
     have the same meanings as in section 3 of the Federal Deposit 
     Insurance Act.
       ``(B) Nondepository institution.--The term `nondepository 
     institution' means any entity that is not a depository 
     institution.''.

     SEC. 204. DATA COLLECTION AND REPORTING.

       (a) Collecting and Monitoring Consumer Complaints.--
       (1) In general.--The Director of the Office of Thrift 
     Supervision shall record and monitor each complaint received 
     directly or indirectly from a consumer regarding a Federal 
     savings association or any subsidiary of a Federal savings 
     association and record the resolution of the complaint.
       (2) Factors to be included.--In carrying out the 
     requirements of paragraph (1), the Director of the Office of 
     Thrift Supervision shall include--
       (A) the date the consumer complaint was received;
       (B) the nature of the complaint;
       (C) when and how the complaint was resolved, including a 
     brief description of the extent, and the results, of the 
     investigation made by the Director into the complaint, a 
     brief description of any notices given and inquiries made to 
     any other Federal or State officer or agency in the course of 
     the investigation or resolution of the complaint, a summary 
     of the enforcement action taken upon completion of the 
     investigation, and a summary of the results of subsequent 
     periodic reviews by the Comptroller of the extent and nature 
     of compliance by the Federal savings association or 
     subsidiary with the enforcement action; and
       (D) if the complaint involves any alleged violation of a 
     State law (whether or not Federal law preempts the 
     application of such State law to such Federal savings 
     association) by such savings association, a cite to and a 
     description of the State law that formed the basis of the 
     complaint.
       (b) Report to the Congress.--
       (1) Periodic reports required.--The Director of the Office 
     of Thrift Supervision shall submit a report semi-annually to 
     the Congress on the consumer protection efforts of the Office 
     of Thrift Supervision.
       (2) Contents of report.--Each report submitted under 
     paragraph (1) shall include the following:
       (A) The total number of consumer complaints received by the 
     Director during the period covered by the report with respect 
     to alleged violations of consumer protection laws by Federal 
     savings associations and subsidiaries of Federal savings 
     associations.
       (B) The total number of consumer complaints received during 
     the reporting period that are based on each of the following:
       (i) Each title of the Consumer Credit Protection Act 
     (reported as a separate aggregate number for each such 
     title).
       (ii) The Truth in Savings Act.
       (iii) The Right to Financial Privacy Act of 1978.
       (iv) The Expedited Funds Availability Act.
       (v) The Community Reinvestment Act of 1977.
       (vi) The Bank Protection Act of 1968.
       (vii) Title LXII of the Revised Statutes of the United 
     States.
       (viii) The Federal Deposit Insurance Act.
       (ix) The Real Estate Settlement Procedures Act of 1974.
       (x) The Home Mortgage Disclosure Act of 1975.
       (xi) Any other Federal law.
       (xii) State consumer protection laws (reported as a 
     separate aggregate number for each State and each State 
     consumer protection law).
       (xiii) Any other State law (reported separately for each 
     State and each State law).
       (C) A summary description of the resolution efforts by the 
     Director for complaints received during the period covered, 
     including--
       (i) the average amount of time to resolve each complaint;
       (ii) the median period of time to resolve each complaint;
       (iii) the average and median time to resolve complaints in 
     each category of complaints described in each clause of 
     subparagraph (B); and
       (iv) a summary description of the longest outstanding 
     complaint during the reporting period and the reason for the 
     difficulty in resolving such complaint in a more timely 
     fashion.
       (3) Disclosure of report on ots website.--Each report 
     submitted to the Congress under this subsection shall be 
     posted, by the Director of the Office of Thrift Supervision, 
     in a timely fashion and maintained on the website of the 
     Office of Thrift Supervision on the World Wide Web.
                                 ______