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U.S. Senate vote leaves Manteca residents, others at mercy of federal banks
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WASHINGTON (AP) — The Senate voted to roll back efforts to give states more consumer powers Tuesday – a partial victory for federally chartered banks that don’t want state regulators meddling in their business.
It also means victims of questionable mortgage practices such as Manteca resident John Thibault will be forced to fend for themselves without strong California consumer laws to help protect them.

Thibault, a 60-year-old Vietnam veteran, has sued a federal bank over failure to disclose all loan terms. According to his lawsuit, when he sought to refinance his two-story house in 2006, a subsidiary of now-defunct Countrywide Financial offered him an adjustable rate mortgage with a 1.5 percent initial interest rate.

The following month, his interest rate ballooned to 7.5 percent. While his payment remained the same, the additional $2,200 he owed a month got tacked on to the balance of his loan, ultimately increasing the size of his mortgage to twice the value of his house.

“Just to try to keep the payments going I’ve had to sell my stock, use up all my savings and am maxing out on my credit cards trying to maintain the bills, including utility bills and even putting food on the table for my family,” Thibault said in an interview.

Thibault sued Countrywide Bank, a federally chartered institution, and its affiliates claiming they failed to disclose all the terms of the loan in violation of California consumer laws. If recent history is any guide, his case against the bank will be dismissed on the ground that federal law preempts state law when it comes to federally chartered banks.

“We’ve lost almost every single case on pre-emption,” Thibault’s lawyer, Jeffrey Berns, said. “What’s sad is you have some really good federal district court judges who are saying, ‘We feel we don’t have any choice.’”

The Senate voted 80-18 to rein in the underlying bill’s provisions permitting states to write and execute tougher consumer financial laws and to let state attorneys general enforce federal laws.

Under current law, federal regulators have been able to issue a blanket rule overriding state laws concerning licensing, credit terms and loan disclosures. The result has been an inability by state regulators to impose those rules on national banks and a rash of dismissed lawsuits brought by homeowners claiming national banks or their subsidiaries violated state consumer rules.