State Attorneys General have won a major turf battle in the U.S. Supreme Court. The High Court held that states may enforce their anti-discrimination and consumer protection laws against national banks. The Court, in a 5-4 ruling, struck down a regulation issued by the chief federal regulator of national banks that pre-empted the states’ power to enforce those laws. Justice Antonin Scalia, writing for the majority, said the regulation was an unreasonable interpretation of the National Bank Act.
This decision affirms the critical role states play in this type litigation. It’s important because the federal government hasn’t enforced these state consumer-protection and fair-lending laws in the past. This case was being watched closely not only by the banking industry, but by major civil rights and consumer organizations, and public and private state regulatory groups.
The case before the Court began in 2005 when then-New York Attorney General Eliot Spitzer sought nonpublic data and information regarding the mortgage lending practices of several national banks and their subsidiaries. Publicly reported data by those banks showed significantly higher-interest, residential mortgage rates charged to minorities compared with white borrowers and that suggested a prima facie case of race discrimination in violation of state and federal fair-lending laws. The Office of Comptroller of the Currency, asserting exclusive “visitorial” authority over national banks, and the Clearing House, a consortium of national banks, successfully enjoined the state’s data request.
At issue in the High Court challenge, brought by New York Attorney General Andrew Cuomo, was a 2004 regulation that said states had no right “to inspect, superintend, direct, regulate or compel compliance by a national bank with respect to any law, regarding the content or conduct of activities authorized for national banks under Federal law.” Writing for the majority, Justice Scalia acknowledged some “ambiguity” in the National Bank Act’s term “visitorial” powers. But he said the Court’s cases have always understood the term as the comptroller’s right to oversee corporate affairs, “quite separate from the power to enforce the law.” The act, he said, preempts states from the former, not the latter. Justice Scalia wrote further:
If the Comptroller’s exclusive exercise of visitorial powers excluded law enforcement by the States, it would also preclude law enforcement by federal agencies. Of course it does not.
The majority of the Court ruled that New York did not have the right to enforce its law through an administrative act or by threat of subpoena. States must pursue enforcement in court. Justice Clarence Thomas, joined by Chief Justice John Roberts Jr. and Justices Anthony Kennedy and Samuel Alito Jr., dissented, saying the text, structure and history of “visitorial powers” supported the comptroller’s “reasonable” interpretation.
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