Posts Tagged ‘Supreme Court’

States back at the plate

Last week the U.S. Supreme Court granted states attorneys general the power to sue federally regulated financial institutions for violating state fair lending laws. The opinion in Cuomo v. Clearinghouse [PDF] was written by Justice Antonin Scalia, joined by the court’s four liberals. When Scalia says the Bush administration has gone too far, you know we’re in trouble.

Here’s what happened: over the past decade a number of states began passing their own laws and regulations with the objective of curbing predatory practices by financial institutions, especially subprime lenders that disproportionately targeted black and Latino borrowers. Thanks to the Home Mortgage Disclosure Act, one of the great achievements of Gale Cincotta and other community reinvestment activists, it’s possible to identify discriminatory patterns in lenders’ business practices (when they report accurately, which they don’t always).

North Carolina’s anti-predatory lending law was an early and influential one; New York imposed measures too, and then-Attorney General Eliot Spitzer began going after lenders regulated by the New York State Department of Banking. As states took action, the Bush administration’s Office of the Comptroller of Currency did too, first blocking North Carolina’s law and then preempting all states from enforcing their regulations and laws – enforcement that would have curtailed many dangerous and exploitative loan products, features and sales practices.

Thanks to the court’s ruling, states can go after fair lending violations but not other types of infractions outside the scope of this particular case. It also does not give states the power to subpoena prior to the filing of a lawsuit, which has Bob Lawless at Credit Slips suspecting that states will “sue first, supoena later” – “the banks might come to regret what they asked for.”

Saturday, July 4th, 2009 | Tags: , , ,
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