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Banks Must Obey State Fair Housing Laws, Court Rules

Scalia joins liberals in overturning "bizarre" rule

By Mark Huffman
ConsumerAffairs.com

June 29, 2009
The U.S. Supreme Court ruled Monday that states may investigate national banks to determine if they have discriminated against minorities seeking home loans, and bring charges against them if they have.

The ruling came in a case where a U.S. Appeals Court had blocked New York Attorney General Andrew Cuomo from investigating or bringing enforcement action against national banks, which may have been violating fair housing statutes.

The ruling overturns a policy by the Office of the Comptroller of the Currency that prevented states from enforcing their own fair housing laws. Justice Antonin Scalia, one of the more conservative voices on the court, joined his four liberal colleagues in making the decision. Scalia said it would be "bizarre" to block states from enforcing valid, non-pre-emptive laws.

In a statement, Cuomo called it "a huge win for consumers across the nation." He said it reaffirms the role of state attorneys general as guardians of consumer rights against the nation’s most powerful financial institutions.

The decision also won praise from the NAACP Legal Defense and Educational Fund.

"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, an 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.

"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," Payton said.

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