# O **NEWS RELEASE**

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| ## Comptroller of the Currency      | ##### NR 2002-10               |
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| Administrator of National Banks     |                                |
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FOR IMMEDIATE RELEASE Contact: Robert M. Garsson

February 12, 2002 (202) 874-5770

### Comptroller Calls Preemption a Major Advantage of National Bank Charter

WASHINGTON\-- Comptroller of the Currency John D. Hawke, Jr. said today
that the creation in 1863 of a uniform charter which allows national
banks to operate with immunity from many state and local laws has
benefited both banks and the nation's consumers.

"The ability of national banks to conduct a multistate business subject
to a single uniform set of federal laws, under the supervision of a
single regulator, free from visitorial powers of various state
authorities, is a major advantage of the national charter," Mr. Hawke
said in a speech before a professional organization, Women in Housing
and Finance.

At the same time, the Comptroller said, the OCC takes tremendous pride
in its ability to deliver a high level of protection to consumers
nationwide without subjecting national banks to excessive and costly
regulation.

In one recent case, Mr. Hawke said, the OCC brought an action against a
bank on behalf of consumers nationwide \-- and won more than \$300
million for customers wronged by the bank's marketing practices. That
decision involved a groundbreaking interpretation of the Federal Trade
Commission Act.

In his speech, the Comptroller described the role of federal preemption.
Acting under the Supremacy Clause of the Constitution, the courts have
consistently limited the ability of states to prevent or significantly
interfere with lawful activities of national banks. The courts have held
that states may not prevent national banks from engaging in
congressionally-granted powers, or stand as an obstacle to the purposes
for which the national bank charter was created. In addition, the states
may not regulate at all in areas where federal interest predominates or
where Congress has fully "occupied the field."

"The Office of the Comptroller of the Currency was created to charter
and supervise national banks, which would serve as instruments of a
uniform and secure national currency, and help stabilize and support the
national economy," said the Comptroller.

"Operating under a broad and potent grant of enumerated powers and such
'incidental powers as shall be necessary to carry on the business of
banking,' the national banks were designed from the outset to carry on
the business under uniform rules, uniformly high standards, and uniform
federal supervision," Mr. Hawke added.

The Comptroller noted that preemption must be "value-blind" with respect
to the desirability of the state law involved. In preemption situations,
the only relevant issue is whether the state law would impair or
significantly interfere with a national bank's exercise of powers
granted to it under federal law.

The Comptroller raised one caution about preemption. "The benefit that
national banks enjoy by reason of this important constitutional doctrine
cannot be treated as a piece of disposable property that a bank may rent
out to a third party that is not a national bank. Preemption is not like
excess space in a bank-owned office building. It is an inalienable right
of the bank itself."

In the case of the payday lending industry, Mr. Hawke said, the OCC has
opposed arrangements in which third parties effectively "rent out" the
preemption privileges of a national bank for the sole purpose of evading
state law.

"Not only do these arrangements constitute an abuse of the national
charter, but they are highly conducive to the creation of safety and
soundness problems at the bank, which may not have the capacity to
manage effectively a multistate loan origination operation that is in
reality the business of the payday lender."

While some state laws may be preempted because they conflict with
federal law, Mr. Hawke noted that the OCC enforces an array of federal
consumer protection laws on behalf of bank customers nationwide.

"We conscientiously enforce all of those laws," he said. "In fact, we
have more than 300 examiners who spend all or part of their time on
consumer protection compliance."

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  The OCC charters, regulates and examines approximately 2,200 national
  banks and 52 federal branches of foreign banks in the U.S., accounting
  for more than 54 percent of the nation's banking assets. Its mission is
  to ensure a safe and sound and competitive national banking system that
  supports the citizens, communities and economy of the United States.
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