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States Worry About Federal Preemption In Consumer Bill

Officials say federal regulations shouldn't tie states' hands

By Mark Huffman
ConsumerAffairs.com

November 5, 2009

There's a good reason to worry. While many states have tough laws capping interest rates for example, those laws are "pre-empted" by federal regulations governing national banks. So national banks that issue credit cards can charge whatever interest rate they please, regardless of state laws.

"It's important that states are not precluded from protecting their citizens, and that state and federal authorities can work together to better enhance consumer protection efforts," said Florida Attorney General Bill McCollum.

While not speaking to the merits of creating such an agency, McCollum and 39 other attorneys general offered several reasons for not preempting state laws and for supporting state enforcement of new Consumer Financial Protection Agency regulations. The attorneys general stressed they were not seeking to challenge federal authority but to enhance it and make it more efficient and effective on behalf of consumers nationwide.

The landmark predatory lending settlement against Countrywide, which returned hundreds of millions of dollars to victimized borrowers while forcing changes to lending practices, was cited as an example of the states' ability to assist federal regulatory agencies with their enforcement burden. Florida was a lead state in the litigation against Countrywide and the subsequent settlement.

Federal preemption of state laws is a priority issue for the attorneys general. In January, the National Association of Attorneys General (NAAG) called on the Obama administration and the 111th Congress to resist federal preemption of state laws, particularly in the enforcement of state banking and mortgage foreclosure laws.

This week, in a similar effort to enhance the attorney general's ability and jurisdiction to protect consumers, McCollum asked the Florida Legislature for expanded authority to bring civil lawsuits against abusive debt collectors. The draft legislative language would make certain debt collector practices a "per se" violation of the Florida Deceptive and Unfair Trade Practices Act, which would allow the Attorney General, as an enforcing authority of the act, to pursue a violation of the debt collection act as unfair or deceptive without having to prove separately unfairness or deception.

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