December 18, 2023

Warren, 6 Senators to Bank Regulator: Don’t Block States’ Efforts to Defend Consumers from Harmful Bank Practices

OCC is Overstepping its Dodd-Frank Authority and Preempting Tough State Consumer Protections

Text of Letter (PDF) 

Washington, D.C. – United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, led 6 senators in a letter to Acting Comptroller of the Currency Michael Hsu, calling on the Office of the Comptroller of the Currency (OCC) to allow states to move forward with their efforts to protect consumers from harmful bank practices. The senators criticized the OCC for overstepping its preemption authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which the agency is abusing to block tough, state-level consumer protections.

Along with Senator Warren, Senators Jack Reed (D-R.I.), a member of the Senate Banking, Housing, and Urban Affairs Committee, Tammy Duckworth (D-Ill.), Peter Welch (D-Vt.), Ed Markey (D-Mass.), Sheldon Whitehouse (D-R.I.), and Bernie Sanders (I-Vt.) signed the letter. 

“Enacted in the wake of the Great Recession, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act establishes the limited conditions under which federal law trumps state consumer protection laws. However, in the years since Dodd-Frank’s passage, the OCC has pushed beyond Congress’s directives to block legitimate efforts by states to defend their consumers from harmful bank practices,” wrote the senators. 

Section 1044 of Dodd-Frank governs the OCC’s preemption authority and sets forth three conditions under which federal law preempts state consumer protection law: (1) the state law favors state banks over national banks, (2) the state law “prevents or significantly interferes with” a national bank’s exercise of its powers pursuant to the Supreme Court’s decision in Barnett Bank v. Nelson, or (3) a federal law other than the National Bank Act preempts the state law. Section 1044 also contains strict procedural requirements to ensure compliance with its substantive standards. 

The senators noted that the OCC has not operated consistent with Congress’s carefully calibrated regime in the years since Dodd-Frank: 

  1. The OCC has improperly sidestepped Section 1044 to justify preempting broad categories of state consumer protection law. Section 1044 states that a state consumer protection law is preempted “only if” one of three specified statutory conditions is met. However, in 2020, the OCC issued an interpretive letter asserting that an OCC action with “indirect . . . effects on a state consumer financial law” is not a preemption determination and therefore is not subject to the substantive or procedural requirements in Section 1044.  
  2. The OCC has issued regulations that contravene the terms of Section 1044. In 2011, the agency re-published three blanket preemption rules originally issued in 2004 which superseded entire swaths of state consumer protection law. But the OCC disregarded the core requirements of the Dodd-Frank Act when doing so.
  3. The OCC has not reviewed its preemption determinations every five years as required by Section 1044. Dodd-Frank’s periodic review requirement is an important mechanism for public examination and thoughtful consideration of the OCC’s prior preemption determinations. But in the twelve years since Dodd-Frank became effective—a period during which the OCC should have conducted a minimum of two cycles of reviews for each of its preemption determinations—the OCC has conducted none.
  4. The OCC has unduly interfered with states’ abilities to gather information about credible violations of non-preempted state consumer protection laws, as argued recently by a coalition of 21 state attorneys general. Under a 2002 agency advisory letter, state attorneys general are discouraged from contacting national banks about allegations of illegal behavior, and national banks are discouraged from responding to state requests for such information. The OCC’s policy has meaningfully hamstrung states in their efforts to protect consumers from harmful national bank practices, despite a 150-year history of dual enforcement by both state governments and the federal government over national banks.  

“It is long past time for the OCC to stop ‘pick[ing] and choos[ing] what portion of the law binds’ it.  Accordingly, we urge the OCC to (1) conduct the agency’s statutorily mandated and long overdue review of its preemption determinations; (2) rescind any regulations, orders, interpretive letters, or other guidance that contravene Section 1044, including the agency’s 2011 preemption regulations and its 2020 interpretive letter; and (3) issue supervisory guidance directing all national banks to comply with state requests for information regarding credible allegations involving non-preempted state consumer protection laws. To better understand the OCC’s efforts to apply governing preemption standards, we ask that you provide a briefing and written update by December 29, 2023,” concluded the senators. 

Senator Warren is a leader in the fight to hold the OCC and other financial regulators accountable in their work to protect consumers and the economy from abuses by giant financial institutions: 

  • In August 2023, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Economic Policy, Senator Warren highlighted the need for regulators to implement the strongest version of bank merger review guidelines in order to ensure stability in the financial system. 
  • In June 2023, Senator Warren sent a letter to Assistant Attorney General Jonathan Kanter, Federal Deposit Investment Corporation (FDIC) Chairman Gruenberg, Acting Comptroller of the Currency Hsu, Federal Reserve Vice Chair for Supervision Michael Barr, and Treasury Secretary Janet Yellen, urging regulators to promote greater competition in the banking sector by toughening their stances on bank mergers and strengthening bank merger review guidelines.
  • In May 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Acting Comptroller Hsu on his decision to approve JPMorgan Chase’s purchase of First Republic Bank after its collapse. This merger allowed a large, poorly supervised bank to be swallowed by America’s largest bank, making it $200 billion larger than it was before.
  • In May 2023, Senator Warren sent a letter to Acting Comptroller Hsu and FDIC Chair Gruenberg, questioning the terms of the sale of First Republic Bank to JP Morgan Chase and the rationale behind the OCC and FDIC’s approval of the deal. 
  • In December 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators: the Federal Reserve, FDIC, and the OCC, raising concerns about the ties between the banking industry and crypto firms following FTX’s bankruptcy. The senators asked each regulator how they assessed the banking system’s exposure to crypto risks. 
  • In December 2022, Senator Warren and Representative Ilhan Omar (D-Minn.) sent a letter to the heads of all U.S. banking regulators, including Acting Comptroller Hsu, calling on them to improve banking access for immigrant communities and communities of color.  
  • In August 2022, Senators Warren, Dick Durbin (D-Ill.), Whitehouse, and Sanders sent a letter to the OCC, calling on it to rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators. 

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