In its 5-4 decision in Cuomo v. Clearing House Assn., L.L.C. the Supreme Court ruled that states, not just federal authorities, can enforce their own fair lending and consumer protection laws against national banks. Consumer advocates say the ruling will play a major role in how consumer protection and civil rights laws are enforced.
The case began in 2005 when the state of New York tried to investigate certain national banks it believed were charging minority borrowers higher interest rates than White borrowers.
National banks, who are already regulated by the federal government, argued that state scrutiny of their mortgage lending records would unleash a complicated patchwork of state regulations that would make it hard for them to meet the needs of their customers across all 50 states.
But Justice Antonin Scalia, writing for an unusual group of four other justices – Justices Stevens, Souter, Ginsburg, and Breyer – found that in instances where state and federal law do not explicitly conflict, states should be free to enforce their civil rights laws in court. Otherwise, said Scalia, 'the bark remains, but the bite does not.'
'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. This decision will help to restore confidence in the financial services industry and the national economy,' said Michael Calhoun, president of the Center for Responsible Lending.
Read the opinion.