Comments of the National Consumer Law Center to Office of Comptroller
of the Currency
Rules, Policies, and Procedures for Corporate Activities
(Annual Report on Operating Subsidiaries)
Docket No. 04-08
April 26, 2004
The National Consumer Law Center1 files these comments on behalf
of its clients, with a special focus on low-income borrowers who are homeowners
with mortgages that are originated or purchased by national banks and their
operating subsidiaries and those who have been affected by predatory mortgage
lending and other abusive lending practices.
In 2004, the Office of the Comptroller of the Currency adopted four broad regulations
that purport to preempt state laws in the areas of deposit-taking, non-mortgage
lending, mortgage lending, and, generally, the business of banking.2
These new preemption regulations apply on their face to national banks and,
according to the OCC, to their operating subsidiaries.3
Criticism of these new rules has been swift and intense, particularly to the
application of broad preemption rights to operating subsidiaries.4
This current round of rulemaking does not respond to that criticism. Rather,
the OCC seeks comment on what information national banks ought to report annually
regarding their operating subsidiaries that will “assist consumers.”
NCLC has serious concerns over the new preemption regulations and the operating
subsidiary preemption regulation published in 2001. We filed extensive comments
showing that national banks and their operating subsidiaries are involved in
predatory lending and describing the harms we think will result from these new
regulations. However, since the OCC chose to adopt those regulations in essentially
the form proposed, consumers must live with them unless the courts, Congress,
or the OCC itself says otherwise. Consequently, we believe that consumers should
have access to information from the OCC regarding whether a particular company
is or is not an operating subsidiary of a national bank.
Currently, the information available to the public regarding operating subsidiaries
is far from adequate. In February 2004, the OCC added a searchable list of many,
but not all, of the national bank subsidiaries that engage in consumer lending
on its website. The list appears at www.occ.treas.gov/OpSublist.pdf.
Or one can go to the OCC home page at www.occ.treas.gov
and click on "Customer Assistance." We urge the OCC to continue to
make this website accessible to consumers with certain essential information
as discussed below.
The proposed regulation would require national banks to report the following:
the name and charter number of the parent national bank;
the name, mailing address and telephone number of the operating subsidiary;
the principal place of business of the operating subsidiary;
the lines of business of the operating subsidiary, using certain codes.5
This information will be helpful to consumers. However, we suggest that the
name, address, and state where the national bank itself is chartered ought to
be included. Arguably, the law of the state where the parent bank is located
could apply to the operating subsidiary, at least for section 85 purposes. Knowing
the bank’s home state is important. Further, the business codes should
be reprinted on the OCC website so consumers can easily determine the line of
business of the operating subsidiary.
However, three other pieces of information are critically important. First,
consumers need to know the date when a company became an operating subsidiary.
This information is essential because loans originated before that date by that
company are not entitled to § 7.4006 preemption. The yardstick of preemption,
if any, against which the loan must be measured would be based on other factors,
not on the fact that the lender was related to a national bank.
Second, consumers need to know the date when a company lost its status as
an operating subsidiary. Companies are bought and sold regularly. Bank holding
companies and their holdings are reorganized relatively frequently. This information
is essential because loans originated after that date by that company are not
entitled to § 7.4006 preemption.
Third, the national bank should report the name, address, and telephone number
of any registered agent of its operating subsidiaries for service of process.
This information will assist consumers in properly notifying the operating subsidiary
if they have complaints, whether informal ones, complaints they filed with the
OCC, or complaints they filed in court.
For these reasons, we strongly urge the OCC to amend its proposed
regulation as follows:
12 C.F.R. § 5.34(e)(6)(ii)
(A) The name, charter number, and address where chartered of the parent
national bank;....
(E) The date on which the company became an operating subsidiary of
the parent national bank;
(F) The date on which the company’s status as an operating subsidiary
of the parent national bank ended;
(G) The name, address, and telephone number of the registered agent
for service of process of the operating subsidiary.
CONCLUSION
Until the OCC put some information on its website in February of this year,
consumers had no easy public access to any type of information about which companies
were owned by national banks, and of those, which were operating subsidiaries
(as opposed to financial subsidiaries). The website is a good first step. We
believe collecting all of the information suggested in our comments and making
it available on the OCC website to be mined easily by consumers is an important
function of the OCC. Preemption of state laws is a serious matter. Information
about those entities actually entitled to wear the cloak of national bank preemption
should be obtainable by consumers in a relatively effortless fashion.
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1 The National Consumer Law Center,
Inc. (NCLC) is a non-profit Massachusetts Corporation, founded in 1969, specializing
in low-income consumer issues, with an emphasis on consumer credit. On a daily
basis, NCLC provides legal and technical consulting and assistance on consumer
law issues to legal services, government, and private attorneys representing
low-income consumers across the country. NCLC publishes a series of sixteen
practice treatises and annual supplements on consumer credit laws, including
Truth In Lending, (5th ed. 2003) and Cost of Credit (2nd ed. 2000) and Repossessions
and Foreclosures (5th ed. 2002) as well as bimonthly newsletters on a range
of topics related to consumer credit issues and low-income consumers. Chapter
3 of Cost of Credit discusses federal preemption as it relates to and affects
consumer credit transaction. NCLC’s staff also has written and advocated
extensively regarding mortgage lending and predatory lending, conducted training
for thousands of legal services and private attorneys on the law and litigation
strategies to defend against predatory loans, and provided extensive oral and
written testimony to numerous Congressional committees on the topic. NCLC’s
attorneys were closely involved with the enactment of the Home Ownership and
Equity Protection Act in Congress, and the initial and subsequent rules pursuant
to that Act. Representatives of NCLC have actively participated with industry,
the Federal Reserve Board, Treasury, and HUD in extensive discussions about
how to address predatory lending. These comments are written by NCLC attorney
Elizabeth Renuart.
2 12 C.F.R. §§ 7.4007 (deposit-taking),
7.4008 (non-mortgage lending), 7.4009 (business of banking generally), 34.3
(mortgage lending), 34.4 (mortgage lending). See 69 Fed. Reg. 1904 (Jan. 13,
2004). These regulations were effective on February 12, 2004.
4 See Arthur E. Wilmarth, Jr., The OCC’s
Preemption Rules Exceed the Agency’s Authority and Present a Serious Threat
to the Dual Banking System, 23 Annual Rev. of Banking Law ___(Spring 2004)(forthcoming);
Testimony of Thomas J. Miller, Attorney General of Iowa, Before the Subcommittee
on Oversight and Investigations, House Committee on Financial Services (Jan.
28, 2004), available at http://financialservices.house.gov/media/pdf/012804tm.pdf
. Ten Democrats on the Senate Banking Committee and twenty-two Democrats and
one Independent on the House Financial Services Committee urged the OCC to put
the rules on hold. “Trade Groups Back Hawke on Preemption; Question
Sarbanes Request to Delay Rules,” 81 Banking Report 918 (Dec. 22,
2003); Todd Davenport, “OCC: States Should Focus on Nonbanks,”
The American Banker at 3 (Deb. 13, 2004). See also “Spitzer, New York
Officials Call for OCC to Reverse Position on Preemption Rules,”
81 Banking Reporter 901 (Dec. 15, 2003).
and NCLC