Alert February 17, 2009

Comptroller Criticizes Congressional Oversight Fund Report on Regulatory Reform on Discussion of Effects of Federal Preemption

In a defense of consumer protection standards applicable to national banks, Comptroller of the Currency John C. Dugan wrote a letter to Elizabeth Warren, Chair of the Congressional Oversight Panel (the “Panel”) stating that the Panel’s “Special Report on Regulatory Reform” (the “Report”) was incomplete and gave inaccurate impressions in its discussion of federal preemption of state consumer protection laws in the context of national banks.

Comptroller Dugan took issue with the Report’s suggestion that the doctrine of federal preemption results in state regulation producing more robust consumer protection standards than are applicable to national banks.  Comptroller Dugan stated, and provided supporting data, that most toxic subprime mortgages were originated by companies subject only to state regulation.  He also stressed that state-regulated nonbank mortgage brokers and mortgage lenders were the “market leaders in the market for subprime loans especially in their most aggressive form.”  In addition, Comptroller Dugan criticized the Report for failing to refer to or consider “the many, many federal consumer protection laws, rules and supervisory guidance applicable to national banks.”