The federal regulator of the largest U.S. banks is attempting to maintain too much power to preempt state consumer financial laws and is ignoring the intent of the 2010 financial reform law, state attorneys general complained in a letter released on Tuesday.

In their letter, to the Office of the Comptroller of the Currency, the AGs argue that a proposed rule issued by the agency in May should be scrapped and replaced with one that gives more deference to states.

The OCC's insistence on maintaining its posture in favor of broad preemption of state law is disappointing and ignores the clear congressional mandate to the contrary, reads the letter, which is dated June 27 and was released on Tuesday by the National Association of Attorneys General.

The letter is signed by 48 state and territorial attorneys general.

States have been feuding with the OCC for years, but the 2010 Dodd-Frank law was supposed to provide more clarity over who has jurisdiction when it comes to policing national banks like Bank of America , JPMorgan Chase and Wells Fargo .

Critics of the agency charge that in the run-up to the 2007-2009 financial crisis, the OCC was too aggressive in preventing states from enforcing their consumer protection laws on national banks, and took an expansive view of its ability to do so under the National Bank Act.

The OCC has said it uses its preemption authority to protect national banks from a patchwork of state laws -- such as those applying to credit cards and mortgages -- that can be contradictory and difficult to comply with.

The Dodd-Frank law scales back the OCC's preemption authorities, but the AG's said the agency is not going far enough to implement the intent of the law.

For instance, Dodd-Frank requires the OCC to meet a stricter standard on preemption by showing that a state law prevents or significantly interferes with a national bank's ability to conduct business.

In their letter the AGs complain the OCC is interpreting this provision broadly by saying this standard will not be the only test the agency uses when making preemption decisions.

The AGs also argued that the May proposal could limit their ability under Dodd-Frank to enforce some federal laws and regulations, such as those issued by the new Consumer Financial Protection Bureau.

The date for submitting comments to the agency on the May proposal closed on June 27.

(Editing by Steve Orlofsky)

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