Supreme Court Rules on Predatory Lending

The Supreme Court today confirmed that our nation’s fair lending laws should be vigorously enforced by all levels of government. Today in Cuomo v. Clearing House Association, the Court rejected federal regulators’ and national banks’ attempts to prevent states from enforcing their own fair lending laws. The Court’s ruling permits states to step up their efforts to curb discrimination in sub-prime lending markets, and is especially timely given that predatory lending has exacerbated the impact of the current economic crisis on minority communities.

“As the Court clearly recognized, this is a time when more — not less — enforcement of fair lending laws is essential,” said John Payton, LDF President and Director-Counsel. “Nothing justifies the federal government’s complete failure to enforce both state and federal antidiscrimination laws against financial institutions. Civil rights always benefit when both states and the federal government work aggressively to curb discrimination.”

The Cuomo case began in 2005, when the New York Attorney General launched an investigation into potential discrimination by national banks. Mortgage lending data indicated that national banks had issued a significantly higher percentage of high-interest predatory loans to African-American and Hispanic borrowers than to white borrowers. The Office of the Comptroller of the Currency (OCC), a small agency within the U.S. Treasury Department, went to court to stop the New York Attorney General’s investigation. OCC’s suit was joined by an association of national banks.

Justice Scalia, writing for the Court, correctly rejected the federal agency’s attempt “to do what Congress declined to do: exempt national banks from all state banking laws, or at least state enforcement of those laws.” The Supreme Court’s ruling restores the collaborative federal-state regulatory scheme that Congress designed to address the persistence of lending discrimination, which has contributed to the recent surge in foreclosures nationwide.

“As today’s ruling confirms, effective financial reform legislation must ensure that both state and federal regulators can take decisive action against lending discrimination wherever and whenever it occurs,” Mr. Payton stated.

Image Credit: walknboston, Flickr