WASHINGTON — Confronting a Democratic Congress and a crucial legal challenge to its power to preempt state laws, the Office of Comptroller of the Currency has been trying to convince critics it is serious about protecting consumers.
During the past four months the agency has released several advisories —
"There's a perception — I think it's a misperception — that we focus solely on safety and soundness, and I think sometimes it's hard to shake that perception," Mr. Dugan said in an interview. "We are trying to make people more aware, because I don't think people realize a number of the things we do routinely. … And addressing consumer complaints is one area that hasn't gotten out as publicly as it should."
Observers said the new emphasis is designed to blunt criticism from a number of quarters, including the new Congress, a Supreme Court challenge to the agency's preemption rules, and two recent Government Accountability Office studies that questioned the OCC's handling of consumer complaints.
The OCC still has work to do, if some recent feedback from Congress is any indicator. At the Senate Banking Committee's first banking hearing, on Jan. 25, Chairman Christopher Dodd singled out the OCC, saying it should "recommit" itself to protecting consumers. On Wednesday, Sen. Dodd criticized all the federal banking regulators, saying they should be doing more to stop predatory lending.
OCC critics are in more powerful positions with the Democrats having won control of Congress in November. House Financial Services Committee Chairman Barney Frank, and two subcommittee chairmen, Rep. Luis Gutierrez and Rep. Carolyn Maloney, have criticized the agency's 2004 rule that said national banks do not have to comply with most state consumer protection laws. The three lawmakers sponsored legislation last year designed to curb the OCC's power, and are weighing whether to reintroduce it.
But Rep. Maloney also credited the OCC for one of its latest consumer-related efforts: sharing consumer complaints with state regulators. The agency has so far reached an accord with five states and is negotiating with six more, a spokesman said.
"I see the effort by federal and state regulators to work together to help consumers as a positive step," Rep. Maloney said Thursday in a statement to American Banker.
Still, she said, many complaints are not being followed through.
"When bank customers have a concern or complaint, they most often turn to their elected officials. I have heard from customers who have tried contacting the federal government but could only reach a recorded message," she said.
The OCC is also defending its preemption powers at the high court. Some Supreme Court justices, including Chief Justice John Roberts, appeared critical at a hearing Nov. 29 of the agency's argument that national banks' operating subsidiaries should enjoy the same shielding from state laws as their parents. Though the court is not expected to decide the issue until this summer, a decision against the agency could open up a new round of legal challenges to preemption, observers said.
Coincidentally, the agency released its annual consumer advisory on gift cards Nov. 28, a day before the case was heard.
Opinion is split on whether the OCC's enhanced emphasis on consumer protection represents real change or window dressing.
John Ryan, executive vice president of the Conference of State Bank Supervisors, said consumer protection historically has not been a mission of the OCC.
"The genesis of bank regulation is not one of consumer protection," Mr. Ryan said. "The genesis is the safety and soundness of the bank. It did not evolve out of a consumer model. State laws came out of consumer protection. It's a different history and evolution focus."
Matthew Lee, the executive director of Inner City Press/Fair Finance Watch in New York, said of OCC officials, "They know they look bad because they" have preempted state laws. "They are undertaking a public relations campaign to appear to look better."
He added: "I'm resisting saying I don't take them seriously as a consumer protection agency. There are good people there … but it's an agency whose mission is in conflict."
Industry veterans agreed Mr. Dugan is trying to overhaul the OCC's image from a promoter of large banks to a protector of consumer interests. But, they said, the agency is simply not equipped to deliver on that pledge.
"The OCC doesn't have the staff, or the expertise, or frankly the culture to pull this off," one said.
Mr. Dugan disagrees.
"We devote more resources than any other agency there is to the function," he said. "We are constantly trying to find ways to make our process more efficient, and we monitor the situation for when we see backlogs and try to address those backlogs … but we do believe we have and are dedicating appropriate resources to this task."
He argues that the OCC is active in the examination process in culling out any predatory lending, and that most reports of abusive practices stem from nonbank lenders.
"Those abuses and practices take place out of the banking system, not just [out of] the national banks, but the state banks as well," Mr. Dugan said. "The really truly abusive practices … definitely are ones that take place outside the banking system, and I think partly that's because of the close supervision we provide to our institutions."
In a Jan. 17 speech to a joint luncheon by the Exchequer Club and Women in Housing and Finance was one moment Mr. Dugan chose to press the message. It was there that he surprised his audience by talking mainly about the agency's Consumer Assistance Group. He said the speech was spurred after a visit to the group in September when he realized little was known about the group.
The assistance group, which is in a central office in Houston, receives as many as 70,000 contacts a year from banking customers, according to a GAO report released a year ago. In 2006 the OCC handled 63,000 cases, of which 28,000 were complaints. Between 2000 and 2004 it processed an average of 10 complaints for every $1 billion under its supervision.
The OCC has recently extended its hours and staff to handle the large flow. The Consumer Assistance Group has 69 employees, up from 48 a year ago. An OCC spokesman said the agency also uses its other resources, including lawyers and examiners, to investigate bank complaints.
But the GAO criticized the group last year. It said that the OCC more frequently closed cases or found that banks did nothing wrong. It also recommended that the agency improve its promotion of the assistance group to consumers and take other steps.
Another GAO report, released in April, also criticized the agency, concluding that the OCC's preemption rule has left uncertainties about the applicability of state consumer protection laws.
