Supreme Court Upholds State Enforcement of Lending Laws

[Update 1: clarifies OCC’s role] A US Supreme Court ruling today gives state attorneys general authority to pursue judicial action against national banks. It also struck down an interpretation of the National Banking Act by the Office of the Comptroller of the Currency (OCC) that led to a regulation preempting states from enforcing fair lending laws. Back in 2005, the New York attorney general sent letters to various national banks requesting nonpublic information on  lending practices, to see if they violated state law in discriminatory mortgage lending to minorities. The OCC brought suit against the New York AG, saying regulatory power granted to the OCC through the National Banking Act preempted the state enforcement. Today’s ruling supports enforcement of fair lending laws at the state level and essentially provides that state AGs have authority that in some cases supersedes federal authority. Comptroller of the Currency John Dugan says that, while he’s “disappointed” with the court’s decision to strike down the OCC’s interpretation of the scope of powers granted to it under the National Banking Act, “everyone benefits from clarification of the law.” He adds: “I want to stress that the OCC is absolutely committed to strong oversight and enforcement of the fair lending laws, and that the OCC and the states share a common goal of ensuring fair access to financial services and fair treatment of consumers and businesses by all financial firms.” Edward Yingling, the American Bankers Association‘s president and CEO, says the decision not only throws out an understanding of the OCC’s authority used over the last 140 years, but also questions the OCC’s very role as regulator of national banks. (The OCC was established in 1863 as a bank supervisory bureau of the US Department of the Treasury.) “Without a uniform regulation and enforcement of the laws that apply to national banks — which often includes state law — those institutions will face a patchwork of duplicative and conflicting federal and state regulation and enforcement actions,” he says. “This will make it difficult to serve consumers in today’s hi-tech, mobile society where people and bank services move constantly across state lines.” For at least one minority interest group, however, the news is welcome. The president of the NAACP’s Legal Defense and Educational Fund, John Payton, says the ruling acknowledges the need for tighter enforcement of fair lending laws. “Nothing justifies the federal government’s complete failure to enforce both state and federal anti-discrimination laws against financial institutions,” he says. “Civil rights always benefit when both states and the federal government work aggressively to curb discrimination.” Write to Diana Golobay.

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