WASHINGTON — Lawmakers launched a much-anticipated debate Tuesday over how much leeway national banks and federal thrifts should have to preempt state consumer protection standards, but no resolution appeared in sight.
The House Financial Services Committee is set to vote today on several amendments to a bill that would create a consumer financial protection agency. A final vote on the bill is expected this week.
One of the most controversial amendments is from Reps. Mel Watt, D-N.C., and Dennis Moore, D-Kan., that is designed to give the Office of the Comptroller of the Currency the ability to preempt state laws on a case-by-case basis. The amendment is meant to rollback the 2004 preemption rules by the agency which broadly asserted the preemption of state consumer protection laws, and return to a standard established by the 1996 Barnett Bank v. Nelson Supreme Court decision.
Under the original bill, the OCC would lose the right to preempt any state consumer law.
But industry representatives and several Republicans argued the Watt-Moore amendment was unworkable, and that it did not do what it set out to do. Both sponsors acknowledged the amendment was a work in progress.
It is "far from perfect," said Moore. "I consider it just a good starting point as we continue to work on this issue. I support it because I think it seeks to introduce preemption to the issue."
Lawmakers expressed some support for expanding the provision so that the OCC would be able to preempt a class of activities, rather than going state by state. Panel members also wanted the amendment to include a provision that said courts should generally defer to the OCC on issues of preemption. While that standard is currently the law, the consumer protection bill would remove it.
"We all recognize that this is an ongoing discussion," Watt said. "We are still talking to all parties. … The areas of case by case rather than classes of things, those are ongoing discussions that I believe we can constructively have between now and the House floor."
Several Democrats expressed support for going further to preserve preemption.
Rep. Ed Perlmutter, D-Colo., offered and withdrew an amendment from Rep. Melissa Bean, D-Ill., (who could not attend the debate because two of her family members have swine flu) that would essentially retain current preemption standards by preserving "uniform standards for federal institutions."
Rep. Jeb Hensarling, R-Ala., offered the Bean amendment and requested a vote. Bean issued a press release saying she was disappointed she could not attend the debate but intended to speak in favor of the need to establish strong national standards.
"My intentions at the committee on Thursday had been to speak to the need for robust national standards and to support the underlying bill to create a strong CFPA that will pursue consumer protection issues as its primary mission, while addressing concerns of colleagues about future Comptroller of the Currency overreach," said the Illinois Democrat.
But Committee Chairman Barney Frank said he opposed the Bean amendment and believed the pre-2004 standard offered by Watt was appropriate. "Under the pre-2004 situation we did not have this terrible problem," he said.
Rep. Maxine Waters, D-Calif., said she was partial to the underlying bill which wipes out all federal preemption of state consumer protection standards. "I rather like the language in the manager's amendment," she said.
