By Joseph A. Giannone
NEW YORK (Reuters) - Big U.S. banks have an unlikely ally in their efforts to shake off state consumer protection laws: federal regulators, say state officials and consumer groups.
National banks have long fought to exempt themselves from state rules, such as those that limit fees and rates they can charge consumers. But the federal Office of the Comptroller of the Currency has recently aligned with national banks to fend off state regulators, leaving consumers more vulnerable, critics say.
And because banks can choose whether they are overseen by federal agencies, like the OCC, or by state authorities, regulation could become more lax as banks migrate to the most lenient overseers, some experts say.
"If we don't relax some rules, we won't have any control over these banks at all," New York Superintendent of Banking Diana Taylor said at the Reuters Banking Summit in New York on Wednesday.
The OCC for its part says it looks out for consumers, and that overlap in regulation increases banks' costs without making the financial system safer.
"It doesn't make any sense for other regulators to come in and duplicate efforts," said Comptroller John Dugan. "We should focus on our institutions and they can focus on theirs, and we can share information instead of having all the cops go to one neighborhood."
In January 2004 the OCC asserted it had sole legal authority over national banks as well as their state-licensed units, in a move known as preemption.
States and consumer groups warn the OCC's actions erode consumer protections, paving the way for abuses such as predatory lending, payday loans and higher fees. Continued...
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