Comptroller of Currency Criticizes Part of Bank-Regulation Proposal

By DAMIAN PALETTA

WASHINGTON -- Comptroller of the Currency John Dugan on Thursday blasted a key provision in the White House's proposal to overhaul supervision of financial companies, labeling as "radical" a move that would allow states to enforce tougher consumer-protection laws against nationally chartered banks.

"This radical change is fundamentally at odds with the concept of efficient national standards for national products and services offered across state lines in national markets -- a concept that has been central to the economic prosperity of the United States since the adoption of our Constitution," he said in a speech to a group called Women in Housing and Finance, according to prepared remarks.
Mr. Dugan's agency supervises national banks, and many banks opt to be regulated by the OCC because its rules pre-empt many state consumer-protection laws.

The White House's plan would create a new agency, called the Consumer Financial Protection Agency, that would establish national standards for products like credit cards and mortgages but would allow states to pass even tougher restrictions. The White House's proposal in this area has long been a goal of consumer groups and certain Democrats who have complained that federal regulators like the OCC haven't been tough enough on banks.

Mr. Dugan, a Republican, said the White House's plan would allow nationally chartered banks to face scrutiny from multiple state agencies at once. "Regressing to a regulatory regime that fails to recognize the way retail financial services are now provided, and the need for a single set of rules for banks with customers in multiple states, would discard many of the benefits consumers reap from our modern financial product delivery system," Mr. Dugan said.

House Financial Services Committee Chairman Barney Frank (D., Mass.) said Wednesday that lawmakers were still discussing the extent to which national rules should pre-empt state standards, even though he has long called for states to have more power in this area.

Conservative Democrats have said they were uncomfortable with the White House's proposal in this area, and it will likely be a flashpoint as lawmakers begin voting on parts of the proposal in the next few weeks.

Mr. Dugan's speech could further anger the White House and Treasury Department, who have complained to congressional Democrats that regulators are just posturing to defend their turf. Mr. Frank and Mr. Dugan had a tense discussion Wednesday during a congressional hearing about the OCC's record in consumer protection, with Mr. Frank accusing the agency of having a poor track record in helping borrowers and Mr. Dugan defending his agency's actions.