OCC Preempts Georgia Fair Lending Law, Blocking State Consumer Protections

The Office of the Comptroller of the Currency, led by Comptroller John Hawke Jr, issues a preemption determination blocking enforcement of the Georgia Fair Lending Act against national banks, marking a turning point in federal regulators’ campaign to shield predatory lenders from state consumer protection laws. Georgia’s law, passed in 2002 in response to rampant predatory lending abuses, restricts high-cost loans and holds assignees (including securitization trusts) liable for predatory lending.

The OCC’s preemption is requested by National City Bank and supported by the American Bankers Association, which lobbied aggressively against state predatory lending laws. Comptroller Hawke argues that national banks operate under federal supervision and cannot be subjected to a “patchwork” of state regulations. The decision effectively nullifies Georgia’s consumer protections for loans originated by national banks or their subsidiaries, leaving borrowers without recourse against predatory practices.

The Georgia preemption establishes the template for broader OCC actions. In 2004, the OCC issues sweeping preemption rules declaring that national banks are exempt from virtually all state consumer protection laws, including those governing predatory lending, discriminatory practices, and unfair debt collection. State attorneys general who attempt to enforce consumer protection laws against national bank subsidiaries are told they lack authority. This regulatory race to the bottom removes precisely the state-level protections that might have limited the subprime explosion. When the housing bubble bursts, the OCC’s preemption doctrine is identified as a key contributor to the crisis, yet the agency faces no accountability for its captured regulatory approach.