NU Online News Service, April 25, 5:21 p.m. — Washington
House Financial Services Committee Chairman Mike Oxley, R-Findlay, Ohio, is accusing the Office of the Comptroller of the Currency of misinterpreting the intent of Congress.
The OCC has issued documents called “determinations” that conclude that some state laws regulating bank insurance activities should be preempted. The OCC says it has the authority to make such determinations under the Gramm-Leach-Bliley Financial Services Modernization Act of 1999.
In a letter to U.S. Treasury Secretary Paul O’Neill, Oxley says the OCC “is mischaracterizing its authority to make determinations regarding the insurance provisions of the GLBA.”
The clear intent of Congress, Oxley says, is that the states be the regulators for all the insurance activities of all persons, and that states should act as the functional regulators for the insurance activities of national banks.
Oxley’s letter follows a recent determination by the OCC that three sections of a Massachusetts law regulating bank insurance activities should be preempted.
For one thing, Oxley says, the OCC identified the wrong standard for evaluating whether a state law should be preempted.
GLB said the preemption standard is whether a state law “prevents or significantly interferes” with bank insurance sales activities, Oxley says.
However, Oxley says, in its determination, the OCC seeks to replace the GLB language with a standard that says a state law should be preempted if it “stands as an obstacle” to accomplishing the purposes of Congress.
The purpose of Congress, he says, is to use the “prevents or significantly interferes” standard, not the “stands as an obstacle” standard.
Moreover, Oxley says, Congress intended financial regulators to work out disagreements over state laws, not act unilaterally.
The OCC should have tried to work out any disagreements with the Massachusetts insurance regulator before issuing a determination, he says.
Even if the OCC could not reach an agreement, Oxley says GLB has a clear procedure for working out differences — an expedited dispute resolution system that does not give unequal deference to either side.
“Accordingly, to the extent the OCC has any legal authority to argue against a state law or regulation, it should seek to overturn the offensive state provision in court, not to urge noncompliance by banks through unilateral opinion letters,” Oxley says.
Oxley is asking O’Neill to try to ensure that the OCC coordinates with the Massachusetts insurance regulator to resolve the issue.
In addition, he is asking that the Comptroller inform the House Financial Services Committee before issuing any further opinion letters preempting state insurance laws, including a description of his efforts to resolve the issue directly with the appropriate state insurance regulators.