Comptroller Jerry Hawke signaled this week in a speech that OCC may be poised to preempt a Georgia anti-predatory lending law, declaring it inapplicable to national banks. While he wouldn't speak definitively since OCC has pending a preemption request from a national bank, Hawke said, "Preemption is a doctrine with almost 200 years of history and constitutional precedent behind it. It is not an issue as to which we have a broad range of discretion."
Hawke said the preemption debate is a distraction from the real issue of how best to combat predatory lending, while ensuring that adequate credit remains available on reasonable terms to mortgage customers of all income levels. Hawke expressed concerns about the "across-the-board" approach taken by several states — albeit with good intentions — to combat predatory lending. By adding significantly to costs for lenders that operate in many jurisdictions (costs that will be reflected in the cost of credit), and by driving legitimate lenders out of the subprime market, these laws may "have the effect of making credit harder to come by for those who may most need it and deserve it," Hawke said. Fannie Mae recently announced it would not purchase mortgage loans subject to New York state and Georgia anti-predatory lending laws, Hawke noted.
"Subprime credit is not the equivalent of predatory credit," Hawke said. Subprime credit has made legitimate credit available to many families that may not have had access previously. "Any law that causes responsible lenders to exit the subprime market must be viewed as problematic."
The better approach, Hawke said, is the one adopted by OCC. Rather than focus on the features of particular loan products, OCC focuses on abusive practices — preventing them, attacking them where they exist, and providing restitution to victims. OCC has issued comprehensive guidelines, which OCC will ensure national banks follow through rigorous examination and enforcement, Hawke said.