Lender Liability Protection to Expand for Waste Sites
Labaton, Stephen, THE JOURNAL RECORD
By Stephen Labaton WASHINGTON - The Environmental Protection Agency is expected soon to expand protection for banks that lend money for property that turns out to contain hazardous wastes.
The new regulation, which has been drafted and is now before the White House for fine-tuning, comes as both the courts and Congress grapple with the issue of when lenders are liable for the hazards found on property that they financed.
The EPA's action was prompted by the Supreme Court's recent decision not to review a significant opinion on the subject by the U.S. Court of Appeals for the 11th Circuit in Atlanta.
The appeals court ruled in the case, United States v. the Fleet Factors Corp., that a commercial financing company could be liable for the cleanup of hazardous waste at a site owned by a company to which it lent money and had a security interest.
The proposed EPA regulation would protect lenders in agency enforcement actions, but would probably not affect many private lawsuits brought by other interested parties.
An agency official said the proposed regulation could be made official within the next few weeks, after agreement is reached between the EPA and the Office of Management and Budget.
For months banks have been complaining about what they see as a growing problem - being handed the bill for cleanups.
They contend that a new EPA regulation would not be enough to protect them and that existing law discourages them from making legitimate loans.
The industry also argues that the existing law leaves them with the Hobson's choice of either foreclosing on potentially pklluted land and incurring the cleanup costs or abandoning it to avoid the rigors of the environmental law.
``The banking industry had a valid exemption, but it has been misconstrued by the courts,'' said John Byrne, senior counsel to the American Bankers Association. ``Now loans aren't being made for fear of the unknown.''
The banks have turned to Sen. Jake Garn, R-Utah and the ranking minority member of the banking committee, and Rep. John J. LaFalce, D-N.Y., for legislation that would provide them with broad exemptions from the Comprehensive Environmental Response, Compensation and Liability Act, also known as Superfund. …