Predatory and abusive lending is, based on the evidence, virtually non-existent in the national banking industry, the Comptroller of the Currency said Thursday. He added that consumers he has spoken with say loan brokers and finance companies are the source of abuses and predation.
"I have met with consumers who have been the victims of predatory lending practices, and the consistent pattern I hear is that the lender at issue was a finance company or a loan broker, not a national bank or its subsidiaries," said John D. Hawke, Comptroller of the Currency, in a statement explaining office's decision to pre-empt Georgia's Fair Lending Act, which is a state law designed to protect borrowers in that state from predatory lending.
"I have made clear on a number of occasions that predatory and abusive lending practices have absolutely no place in the national banking system, and I am glad to say that evidence that national banks are engaged in any such practices is virtually non-existent," Hawke said in the statement, adding "The OCC has no evidence that national banks are engaged in predatory and abusive lending practices to any discernable degree."
Hawke also cited "an extensive study of predatory lending conducted recently by HUD and the Treasury Department," saying that the study found "abuses were less likely to occur in lending by banks that are subject to extensive oversight and regulation."
In the order pre-empting Georgia's law, the document pointed out that the OCC had issued its own "detailed guidance" for national banks to follow when originating mortgages, using brokers and purchasing loans.
The order also cited the supremacy clause of the U.S. Constitution and a recent U.S. Supreme Court case that reaffirmed the exclusivity of federal law in determining the interest rates a national bank can charge.
In his statement, Hawke also pointed out that "the burdens, impediments and inconsistencies of overbroad state and local legislation" on national banks could hinder their ability to make credit available to subprime borrowers.
Last week, another government agency, the Office of Thrift Supervision, pre-empted a New Jersey law aimed at predatory lenders, exempting federal savings associations from the law. The OTS said it had already exempted the associations from similar laws in Georgia and New York.