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States have historically had the authority to regulate businesses operating within their borders. States have been at the forefront of innovation in consumer protection regulation by providing basic banking and other protections for consumers. As Congress moves to expand further the powers of banks, it is essential that states have the authority to protect their residents from price gouging, unfair discrimination and lending practices, and other abusive market practices. We urge Congress to preserve states' rights by re-establishing the principle that state consumer protection laws apply unless they are inconsistent with a clear requirement of federal law.
ANY FINANCIAL SERVICES MODERNIZATION LEGISLATION SHOULD PRESERVE IMPORTANT STATE CONSUMER PROTECTION LAWS. THE WIDE VARIETY OF STATE CONSUMER PROTECTION LAWS INCLUDE:
States have been at the forefront of ensuring consumers have access to basic banking and protecting consumers from exorbitant fees with lifeline banking or similar laws, including laws prohibiting the latest form of price gouging -- ATM surcharges.
There has been much debate over the last decade about the high cost of basic deposit account services. States such as New Jersey and New York have laws that require banks to offer "no frills" checking accounts at an affordable price. Similarly, Massachusetts requires banks to offer free accounts to seniors and minors.
Additionally, Connecticut and Iowa now have ATM surcharge prohibitions. Banks that own ATMs in those states can charge the consumer's bank for ATM usage, but they can't hit consumers with an additional fee at the terminal. Many other states, including Oregon, Arizona, Montana, Missouri, Pennsylvania, Texas, and Massachusetts, are considering ATM surcharge prohibitions, too.
At the very least, Congress should ensure that all banks comply with the consumer laws of the state in which they do business.
States have also acted where Congress has failed to outlaw unfair or unconscionable lending practices by banks.
For example, California has a law that prohibits banks from hitting homeowners with prepayment penalties when they sell their home and, in the process, pay off their existing mortgage. Many other states have similar laws. Congress should preserve these laws that can save homeowners thousands of dollars.
PRESERVING STATE CONSUMER PROTECTION LAWS IS PARTICULARLY NECESSARY BECAUSE THE OCC HAS ARGUED THAT NATIONAL BANKS CAN IGNORE SOME STATE CONSUMER PROTECTION LAWS EVEN WHEN THERE IS NO BASIS FOR THE EXEMPTION IN FEDERAL LAW
Unfortunately, in recent years the OCC has undermined state consumer protection by issuing opinion letters exempting national banks from a number of state consumer protection laws.
Something's amiss when Washington overrides the actions taken by state governments to protect their own residents. Congress needs to clarify that state consumer protection laws apply to all banks doing business in the state, unless they are inconsistent with a clear requirement of federal law.
