Consumer Protection, and Image Protection: OCC Says It's Doing Its Part but Efforts Are Often Unnoticed

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WASHINGTON -- Confronting a Democratic Congress and a crucial legal challenge to its power to preempt state laws, the Office of Comptroller of the Currency has been trying to convince critics it is serious about protecting consumers.

During the past four months the agency has released several advisories -- the latest on Thursday -- on subjects ranging from cashier's checks to gift cards to financial literacy. And last month, an audience that gathered for a speech from Comptroller John Dugan was surprised to hear comments not on policy or supervision but on consumer protection efforts.

"There's a perception -- I think it's a misperception -- that we focus solely on safety and soundness, and I think sometimes it's hard to shake that perception," Mr. Dugan said in an interview. "We are trying to make people more aware, because I don't think people realize a number of the things we do routinely. ... And addressing consumer complaints is one area that hasn't gotten out as publicly as it should."

Observers said the new emphasis is designed to blunt criticism from a number of quarters, including the new Congress, a Supreme Court challenge to the agency's preemption rules, and two recent Government Accountability Office studies that questioned the OCC's handling of consumer complaints.

The OCC still has work to do, if some recent feedback from Congress is any indicator. At the Senate Banking Committee's first banking hearing, on Jan. 25, Chairman Christopher Dodd singled out the OCC, saying it should "recommit" itself to protecting consumers. On Wednesday, Sen. Dodd criticized all the federal banking regulators, saying they should be doing more to stop predatory lending.

OCC critics are in more powerful positions with the Democrats having won control of Congress in November. House Financial Services Committee Chairman Barney Frank, and two subcommittee chairmen, Rep. Luis Gutierrez and Rep. Carolyn Maloney, have criticized the agency's 2004 rule that said national banks do not have to comply with most state consumer protection laws. The three lawmakers sponsored legislation last year designed to curb the OCC's power, and are weighing whether to reintroduce it.

But Rep. Maloney also credited the OCC for one of its latest consumer-related efforts: sharing consumer complaints with state regulators. The agency has so far reached an accord with five states and is negotiating with six more, a spokesman said.

"I see the effort by federal and state regulators to work together to help consumers as a positive step," Rep. Maloney said Thursday in a statement to American Banker.

Still, she said, many complaints are not being followed through.

"When bank customers have a concern or complaint, they most often turn to their elected officials. I have heard from customers who have tried contacting the federal government but could only reach a recorded message," she said.

The OCC is also defending its preemption powers at the high court. Some Supreme Court justices, including Chief Justice John Roberts, appeared critical at a hearing Nov. 29 of the agency's argument that national banks' operating subsidiaries should enjoy the same shielding from state laws as their parents. Though the court is not expected to decide the issue until this summer, a decision against the agency could open up a new round of legal challenges to preemption, observers said.

Coincidentally, the agency released its annual consumer advisory on gift cards Nov. 28, a day before the case was heard.

Opinion is split on whether the OCC's enhanced emphasis on consumer protection represents real change or window dressing.

John Ryan, executive vice president of the Conference of State Bank Supervisors, said consumer protection historically has not been a mission of the OCC. …