WASHINGTON -- The administration appears to be on the verge of striking a deal with consumer groups that, if accepted by Congress, would maintain the primacy of state law in regulating interstate branches of state-chartered banks.

"They have been very cooperative in trying to reach an accord," said Chris Lewis, banking lobbyist for the Consumer Federation of America, who has been negotiating with the administration.

"The talks have been very positive," added a Treasury official who has participated in a number of meetings with the consumer groups. The official asked that he not be identified.

Comment Period Urged

Mr. Lewis said his group is seeking legislative language affirming that state law applies to branches of out-of-state institutions.

The amendment would also set up procedures that must be followed, including notice and a comment period, before the Comptroller of the Currency could preempt state law.

The House and Senate have taken opposite approaches to the issue in their versions of the legislation. The Senate bill treats branches of out-of-state institutions as national banks, subject to federal law and regulation.

The House bill, however, declares that state law and regulation should apply. The two bills must be reconciled in conference.

'Top Issue' for ABA

The issue is arousing strong interest in the banking industry, where many institutions will oppose the consumer groups.

"It's our top issue in the conference," said Edward L. Yingling, chief lobbyist for the American Bankers Association. The House bill and the amendment sought by the consumer groups "could have a real detrimental effect on national banks," he added.

Mr. Yingling said he is concerned that states with activist regulators could make life difficult for national banks that branch within their borders. "For the first time, state regulators could say, 'We have limits on the fees that can be charged, and we're going to apply those to national banks.'"

The consumer federation has been motivated in large part by a 1992 decision in which the Office of the Comptroller of the Currency declared that a recently enacted "basic banking" law in New Jersey did not apply to national banks.

Consumer Protection

"There was no notice, just an opinion letter" from the OCC's general counsel, Mr. Lewis said. "We want Congress to restate the presumption that state laws apply and put out more formal administrative procedures."

Mr. Lewis said consumer groups are particularly interested in the application of consumer protection laws, fair-lending statutes, and community reinvestments. requirements.

Federal law applies in each area. However, consumer groups want states to continue to have the right to enact and enforce more stringent laws.

How state laws should apply has emerged as one of three big issues in the House-Senate negotiations. The other two are: regulation of foreign bank branches and the law's effective date.

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