OTS opinion has holes

February 12, 2003

Lawyers conclude federal regulators left questions unanswered in Georgia, New York


Inman News Features

The federal Office of Thrift Supervision's opinions that high-cost lending liability laws in Georgia and New York are preempted by federal law are "noteworthy," but leave some important questions unanswered, according to one of the nation's largest law firms.

A bulletin from Kirkpatrick & Lockhart called OTS' opinions "a clear assertion" that federal law is the controlling legal authority with respect to federal savings associations and their operating subsidiaries and said those entities likely would welcome the OTS' opinions, even though they're limited in some material ways. For instance, the opinions didn't address the extent to which Georgia's and New York's high-cost lending laws would apply to servicers who took on loans originated by federal savings associations and their operating subsidiaries or loans originated by state housing authorities that are regulated by OTS, according to the law firm.

The bulletin said OTS' opinions were "groundbreaking" because they paved the way for the Office of the Comptroller of the Currency and the National Credit Union Administration to "follow the OTS' lead." That would open the door for other lending institutions to "request guidance" (i.e., challenge) other state and local ordinances.

Georgia's new Fair Lending Act imposes new restrictions on so-called "predatory loans" based on the annual percentage interest rate and the amount of points and fees charged by the lender.

OTS Chief Counsel Carolyn Buck said last month that provisions of the law "purporting to regulate the terms of credit, loan-related fees, disclosures or the ability of a creditor to originate or refinance a loan" are preempted by federal law. That conclusion was based on the Home Owners' Loan Act and OTS regulations that regulate federal savings associations' lending practices, according to the agency, which said the Georgia law conflicts with OTS regulations.

OTS Director James E. Gilleran said the agency is authorized to provide a uniform national regulatory environment for federal savings associations.

Copyright: Inman News Service


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