WASHINGTON - Sen. Alfonse M. D'Amato introduced legislation last week limiting lenders' liability for contaminated property.

"Lenders are targeted as convenient 'deep pockets' and must foot the clean-up bill for contamination, not because they caused it or did not take precautions, but simply because they hold a security interest or have some other technical indicia of ownership," the New York Republican said Friday on the Senate floor.

Banking industry representatives said that Sen. D'Amato's new position as chairman of the Senate Banking Committee may help finally push the bill to enactment.

"Sen. D'Amato has been there on this issue for a long time, but now the concern is reflected all the way up to the leadership of the committee," said Alfred Pollard, senior director at the Bankers Roundtable.

Rather than directing the Environmental Protection Agency to issue rigid rules mandating how lenders must evaluate environmental risks before they extend credit, the D'Amato bill calls for much looser guidelines.

The bill also would clarify environmental cleanup responsibilities of federal banking agencies when they shut down a financial institution or take over its assets.

Legislation clarifying lenders' liability has a long history of near misses. The Senate approved similar measures in both the 101st and 102nd Congresses, yet the legislation never made it through the House.

During the last Congress, lender-liability provisions were tucked into the Superfund reform bill. The measure was approved by five congressional committees in the House and Senate, but partisan wrangling killed the bill at the end of the legislative session last October.

The industry has not gotten any help from the courts, either.

Last June, the American Bankers Association requested a rehearing of a February 1994 case in which the U.S. Court of Appeals for the District of Columbia decided that the EPA did not have the authority to limit lender liability.

The request was denied, and a subsequent petition to the Supreme Court to hear arguments also was rejected. That leaves new legislation as the only option available to the industry.

"There are simply no more judicial avenues open for us," said John Byrne, senior counsel at the ABA. "We no longer have any outlet for the EPA rule other than a legislative outlet."

In the House, Rep. Frederick S. Upton, R-Mich., introduced a similar, but more limited, measure that aims to reinstate the overturned EPA rule.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.