WASHINGTON — The Office of the Comptroller of the Currency has exceeded its ability to overrule state consumer protection laws in favor of federal ones, Sen. Elizabeth Warren, D-Mass., and other lawmakers told the agency's acting Comptroller Michael Hsu in a letter obtained by American Banker. 

According to the letter — led by Warren and signed by Sens. Jack Reed, D-R.I., Peter Welch, D-VT., Ed Markey, D-Mass., Sheldon Whitehouse, D-R.I., and Bernie Sanders, I-VT. — the OCC has acted against congressional intent by preempting the applicability of state consumer protection laws in cases other than the few outlined in the Dodd-Frank Act. 

While the agency moves described in the letter predate current acting Comptroller Hsu's time at the OCC, Hsu hasn't corrected the record when it comes to state preemption. The letter calls on Hsu to rescind any of the regulations, orders, interpretive letters, or other guidance that the lawmakers say contradicts the way Dodd-Frank set up federal banking laws to preempt state consumer protection ones, and to issue new supervisory guidance. 

The issue of state consumer protection laws and how they interact with federal ones is an increasingly hot topic in the courts. A group of U.S. state attorneys general recently wrote a letter to the OCC and the Consumer Financial Protection Bureau to complain about how federally chartered institutions have to comply with state information requests, and the Supreme Court is set to consider whether the National Bank Act trumps state laws requiring banks to pay mortgage borrowers interest on escrow funds. 

In the letter to the OCC sent Friday, the lawmakers took issue with a 2020 interpretive letter issued by the agency that says an action with "indirect" effects on a state law doesn't mean that the state law was preempted. 

"We strongly disagree with this position," the Senate Democrats said in the letter. "As both the United States and a coalition of state attorneys general have recently argued in court, Dodd-Frank specifies only three situations in which state consumer protection laws regulating national banks may be preempted, and 'indirect' preemption is simply not one of them." 

The lawmakers also criticized the OCC for not reviewing its preemption determinations every five years, as required by Dodd-Frank. 

"The Dodd-Frank Act's periodic review requirement is an important mechanism for public examination and thoughtful consideration of the OCC's prior preemption determinations," the lawmakers said in the letter. "But in the twelve years since Dodd-Frank became effective — a period during which the OCC should have conducted a minimum of two cycles of reviews for each of its preemption determinations — the OCC has conducted none." 

The OCC has also "unduly interfered" with states' ability to gather information about violations of non-preempted state consumer protection laws, the lawmakers said. Under a 2002 advisory letter, state attorneys general are discouraged from contacting national banks about allegations of illegal behavior, and national banks are discouraged from responding to state requests for that information, according to the letter. 

The lawmakers urged the agency to issue new supervisory guidance directing national banks to comply with state information requests regarding non-preempted laws. 

And in 2011, the OCC reissued three blanket preemption rules that, according to the letter, "superseded entire swaths of state consumer protection law on topics including terms of credit, mortgage escrow accounts, access to credit reports, and disclosure and advertising." In doing so, the agency also refused to justify its rules in the context of Dodd-Frank, and argued that the OCC didn't need to consult with the Consumer Financial Protection Bureau before issuing the blanket rule, as Dodd-Frank would require. 

The OCC declined to comment on the letter. The OCC said that the agency doesn't comment on congressional correspondence.