Industry News

National banks can skirt state lending laws

Critics say federal preemption rules compromise consumer protection

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A U.S. bank regulator on Wednesday issued final rules that exempt national banks from state lending laws, including those aimed at curbing abusive lending practices known as "predatory" lending. The federal Office of the Comptroller of the Currency said national banks don't have to comply with state banking laws, such as those that regulate loan terms, impose conditions on lending and deposit relationships and require state licenses. "These laws create higher costs and operational burdens that the banks either must shoulder, or pass on to consumers, or that may have the practical effect of driving them out of certain businesses," Comptroller of the Currency John Hawke said in a statement. State banking authorities and consumer protection groups alike say the lack of state authority compromises consumer protection from deceptive lending practices. New York Attorney General Eliot Spitzer criticized the new federal rules. He called the decision "bad public policy" and said it disr...