OCC Plan to Broaden 'Interest' Definition Draws Fire from States,

WASHINGTON - plan by the Comptroller's office to broaden the definition of "interest" to include late charges, annual fees, and over-limit charges. "The OCC's expansive proposed interpretation of the definition of 'interest' would preclude states with consumer protection statutes from enforcing their prohibition or limitation against excessive penalty charges imposed by out-of-state lenders," four national consumer groups wrote in a letter to the agency. "States need the ability to regulate these charges to protect their residents from significant financial burden and from unfair surprise." The definition actually isn't anything new - the Comptroller's office has stated it repeatedly in interpretative rulings. But putting it on the books as part of the federal code, as the Comptroller's office proposed in March, may cause the courts to afford it even more weight than they already have. That at least is the opinion of 11 state attorneys general, who protested the definition in a letter this month to the comptroller. "The OCC's proposal is nothing more than an attempt to bolster the position of the OCC and banks in litigation pending nationwide," they wrote. So far, almost all that litigation has been going banks' way. More than two dozen courts - both state and federal - have ruled that credit card issuers in one state can charge fees to cardholders in another, even if the cardholders' home state bans such fees. The exception has been the Superior Court of Pennsylvania, which in December rejected the argument that fees fall under the category of interest and thus are protected by the National Banking Act from out-of- state regulation. The letters from the attorneys general and from the consumer groups - Public Citizen's Congress Watch, U.S. Public Interest Research Group, Consumer's Union, and Consumer Federation of America - were sent as comments on the agency's "part 7" rulemaking. That broad proposal is designed to clarify and revise interpretative rulings made by the Comptroller's office over the years. The comment period ended May 2. In their comment letters, banks generally supported the part 7 proposals.