Competing Views on the Nation's Top Banking Regulator

Stephanie Mencimer's article on the Office of the Comptroller of the Currency (OCC) and OCC Chief Counsel Julie L. Williams was both dismaying and disappointing because of its serious errors of fact and judgment ("No Account," August 27).

In fact, the OCC has done a great deal for banking consumers, including our pioneering enforcement action against Providian National Bank in 2000 for unfair and deceptive marketing practices. While many banking lawyers and lobbyists argued at the time that no banking agency had the legal authority to take such an action, the OCC, based on legal arguments put forth by Williams, took the action that resulted in the bank returning $300 million to customers. Other agencies have since followed the OCC's lead, but no one should forget how difficult or controversial that first case was.

There are many other examples that Mencimer could have added to her story had she been interested in balance. She could have mentioned that the OCC has consistently advocated a new approach to financial disclosure that focuses on providing the information consumers actually want in a form they can understand. Or she might have pointed out the many consumer protection actions that the agency has taken during the tenure of Williams, including measures to address consumer privacy and identity theft issues, minimum credit card payments, improved gift card and credit card disclosures, and guidance to avoid predatory lending.

Finally, it seems odd that Mencimer would so sharply criticize OCC legal positions, implying they are totally out of the mainstream. In fact, these positions have been vindicated by a nearly unbroken string of judicial decisions by the Supreme Court and federal courts from nearly every part of the country--and authored by a wide range of judges appointed by presidents from both the major political parties. The essence of all these decisions is that, ever since it enacted the National Bank Act in 1864, Congress intended for national banks to be subject to a uniform set of national laws established by Congress and implemented by the OCC, and should not be subject to conflicting state laws. Not surprisingly, that federal principle is not popular with the states, but it is the law of the land. Mencimer may not like that principle either, but that is no reason for launching a diatribe against a career civil servant who has faithfully advocated the views of the agency she represents in legal positions that have been repeatedly ratified by the courts.

John C. Dugan
Comptroller of the Currency
Washington, D.C.

Stephanie Mencimer responds:

I'm always baffled as to why the OCC continues to herald the Providian settlement as evidence of its commitment to consumer protection. That case, now seven years old, was initiated by the tiny San Francisco District Attorney's office, which had received hundreds of complaints from customers about credit card late fees. The OCC didn't lift a finger against Providian, a well-known poster child for credit card abuses, until the San Francisco investigation hit the news stands. (Providian was so bad that it bar-coded its payment envelopes with the wrong zip code to guarantee that people's payment would be delivered late and thus incur a late fee.) When the OCC first contacted the DA's office about Providian, it was to tell the San Francisco prosecutors to drop the case because they lacked jurisdiction. This is hardly a stellar moment for the nation's top banking regulator.

It's telling that the OCC can't actually point to a single, public consumer protection enforcement action taken against a big national bank that the agency initiated on its own. Indeed, the OCC only goes to court over consumer protection issues when it's attempting to put the kibosh on an enforcement action by a state against one of the banks it regulates. There's also little evidence that the "guidance" the OCC is supposedly offering the national banks on credit cards or predatory lending has made much of an impact. In fact, abusive late fees, like those Providian specialized in, have ballooned 160 percent over the past decade, and some attorneys general believe that the OCC's legal actions have actually made banks more brazen in defrauding customers because they know they don't have to worry about state regulatory investigations.

As for OCC's legal successes, it's true that the courts have sided with the OCC in most--but not all--of the cases involving consumer protection issues. But those decisions wouldn't be especially controversial if the agency devoted as much of its legal muscle representing people ripped off by big banks as it does protecting banks from ripped off consumers.

Most criticism of the OCC is over its priorities. Just because the OCC has the power to help trillion-dollar institutions further tromp on debt-ridden Americans doesn't mean that it should.