WASHINGTON - Government officials in California and consumer groups are complaining that the Office of the Comptroller of the Currency is covertly trying to expand its power to override municipal and state limits on bank fees.
In January the agency proposed technical amendments to a hodgepodge of rules, saying that the changes would streamline regulation of national banks. But in comment letters submitted in early April, California politicians - who are locked in a legal battle with banks over restrictions on automated teller machine fees - argued against deleting a requirement that the OCC review each state or local law on a "case-by-case basis" before preempting it.
"The apparent purpose of this amendment is to help national banks sue cities and states that try to protect consumers from excessive fees and unfair competition," wrote San Francisco City Attorney Louise H. Renne.
The OCC's chief counsel, Julie L. Williams, said that the agency never intended to make more than a technical change clarifying that banks do not need the agency's approval to impose fees.
"We weren't intending to change the substance of how the rule works," Ms. Williams said. "It won't have a broader preemptive effect than the laws already on the books."
Specifically, the OCC is proposing to remove a provision from its regulations on national bank charges that says it "evaluates on a case-by-case basis whether a national bank may establish noninterest charges or fees notwithstanding a contrary state law that purports to limit or prohibit such charges or fees."
California Deputy Attorney General Joel Jacobs objected. "Removing the language will not clarify the rule but will instead make its preemptive effect all the more ambiguous," he wrote.
Banks already have broad authority to set fees under the National Bank Act, and courts, including the Supreme Court, generally side with banks when municipalities or states try to limit that authority, Ms. Williams said.
In 1999, for example, a judge in U.S. District Court in San Francisco issued injunctions against ordinances limiting ATM surcharges in Santa Monica and San Francisco. The OCC sided with the banks that sued the two cities. The cities have appealed, and the cases were combined and are pending in the Ninth Circuit Court of Appeals.
Ms. Renne said the proposed change circumvents a direct order from Congress.
"In 1994 Congress criticized the OCC's position that federal law prevented cities and states from regulating national banks' fees," she wrote. "Now the OCC takes one giant step back by erasing what Congress told the OCC to write into its rules: an assurance that the National Bank Act leaves room for states and cities to protect consumers from excessive fees."
Some members of Congress agreed and urged the agency to withdraw the proposed revision while the California appeal is pending.
"We believe the proposed rule may be inconsistent with Congress' express intent that the National Bank Act not preempt all state laws restricting national banks' fees," wrote Reps. Nancy Pelosi and Henry A Waxman, both Democrats of California. "We would appreciate knowing whether the OCC is seeking to eliminate case-by-case analyses."
Though only the courts - not the OCC - can decide whether the National Bank Act preempts specific, consumer-driven state laws, the agency's opinion on such matters carries a lot of weight, said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group.
"The OCC's opinions are extremely powerful and are considered in a very weighty way by the courts," he said.
Mr. Mierzwinski predicted that opinions such as the one the OCC filed in the California case, combined with the proposed rule change, would have a chilling effect on local governments and states considering consumer protection laws such as surcharge limits or deterrents to predatory lending.
