Supreme Court Ruling Empowers States

ecision that is being hailed as a major victory for consumers, the U.S. Supreme Court has overturned lower court decisions and ruled that state attorneys general can go after nationally chartered banks in court for violations of state regulations. The 5-4 decision on Andrew Cuomo v. the Clearing House Association and the Office of the Comptroller of the Currency (OCC) stems from an investigation that former New York Attorney General Eliot Spitzer wanted to conduct on lending practices that discriminated against minorities. Federal appellate judges, however, denied Spitzer's investigation, saying he could not bring state fair-lending law enforcement actions against the big, national banks. The Supreme Court has ruled that state attorneys general cannot issue subpoenas against national banks but can try enforcing state laws in court. "Implicitly, the decision will allow the state attorneys general to enforce other state consumer protection statutes against national banks," says John Cooney, a partner with Venable LLP. "The decision means that national banks will be subject to a greater risk of investigations and enforcement actions by state attorneys general, unless they can persuade Congress to overturn the decision and grant the OCC express authority to preempt the states from applying their own fair lending and consumer protection statutes to national banks." John Dugan, comptroller of the currency, says the regulator is disappoitned that the Supreme Court disagreed with its interpretation of the scope of visitorial powers under the National Bank Act, but that "everyone benefits from clarification of the law." "We will continue to look for ways to improve collaboration and cooperation between the OCC and the states," he said in a press statement. Cuomo says the decision recognizes that fair lending and consumer protection require cooperative efforts among the states and the federal government. "This Supreme Court decision is a victory for taxpayers, who have suffered enormously as a result of abusive business practices in all types of lending," Michael Calhoun, president of the Center for Responsible Lending, said in a statement. "This decision will help to restore confidence in the financial services industry and the national economy. SOURCES: OCC, Center for Responsible Lending, Vena


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