U.S. Supreme Court Overturns Federal Regulatory Preemption of State Civil Rights Enforcement
FOR IMMEDIATE RELEASE: June 29, 2009
CONTACT:
Stacie B. Royster Miller
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202-445-6101, mobile
smiller@lawyerscommittee.org
U.S. Supreme Court Overturns Federal Regulatory
Preemption of State Civil Rights Enforcement
The Lawyers' Committee Applauds the Court's Decision to Enable States' to
Fight the Scourge of Predatory Mortgage Lending in Minority Communities
(Washington, D.C.) - Today, the U.S. Supreme Court's decision in Cuomo v. The Clearing House Association, L.L.C., vindicated civil rights protections for minority borrowers by overturning the part of a 2004 regulation of the Office of the Comptroller of the Currency (OCC) that gave the agency exclusive authority to initiate judicial actions to enforce state fair lending laws against national banks. This decision means that the 50 state attorneys general may renew enforcement of their state's own fair lending laws against national banks regulated by the OCC.
"This decision will unshackle the oversight muscle of state attorneys general whose attempts to enforce fair lending laws against national banks were thwarted when most needed," said Barbara Arnwine, executive director, Lawyers' Committee for Civil Rights Under Law. "In the absence of state enforcement, discriminatory lending practices proliferated, unleashing a flood of foreclosures which continues to have disastrous consequences for minority communities and our financial system."
This case began when the New York attorney general's office initiated fair lending investigations in 2005 based on publicly available data which showed that several national banks had issued a disproportionate number of high-interest home mortgage loans to minority borrowers. Almost immediately after the attorney general began his investigation, the OCC - the federal agency tasked with regulating national bank lending practices - sued to enjoin the investigation in U.S. District Court asserting that pursuant to a 2004 regulation only it could enforce the state's fair lending law. Yet, the OCC never commenced an investigation of its own. The OCC prevailed in U.S. District Court in 2005 and in the U.S. Court of Appeals for the Second Circuit in 2007.
The Lawyers' Committee filed amicus curiae, "friend of the court", briefs in the lower courts, and, when the case reached the Supreme Court, the Lawyers' Committee and the NAACP Legal Defense Fund submitted an amicus curiae brief on behalf of their organizations and the National Fair Housing Alliance urging the Court to reverse the lower court decisions. The brief set out in detail the long history of lending discrimination by the federal government against minorities in this country and how racial and ethnic discrimination has been central to the ongoing foreclosure crisis. It argued that federal fair lending laws contemplated a dual state-federal enforcement structure and that such combined enforcement was needed, especially during the ongoing foreclosure crisis.
The forced inaction of state attorneys general's offices in New York and elsewhere that was a result of this regulation had a devastating impact on the fight against lending discrimination and for consumer protection, as well as the health of the economy -- from the Inland Empire of California to Detroit to Wall Street. Vigorous fair lending enforcement by state attorneys general against financial entities not covered by the OCC regulation is exemplified by their successful cases against the failed mortgage giant Countrywide. But, because of the OCC regulation, they had been unable to use their considerable enforcement resources against national banks, many of which have received Troubled Asset Relief Program funds. This ruling is a step forward in undoing that legacy.
"The mortgage collapse faced by this country is at its core a crisis of civil rights because minority households have lost more of their piece of the American Dream than anyone, resulting in the most severe loss of African American wealth since Reconstruction," said Joe Rich, director of the Lawyers' Committee's Fair Housing Project. "Now that this case is decided, we look forward to increased fair lending enforcement. In addition, we call upon Congress to heed President Obama's clarion call for the regulatory reform of financial markets. His plan, if enacted, includes a provision that would ensure that states are not preempted from enforcing civil rights and consumer protection laws with regard to federally-chartered financial institutions."
Bolstered by this ruling, the Lawyers' Committee will redouble its commitment to marshaling legal resources in defense of homeownership in vulnerable communities through the work of its Fair Housing and Community Development Projects. The present reevaluation of this nation's federal regulatory framework provides advocates with an excellent opportunity to insert a much needed civil rights voice in this critical work and to stop the OCC's interference with strong fair lending enforcement.
The Lawyers' Committee for Civil Rights Under Law (LCCRUL), a nonpartisan, nonprofit organization, was formed in 1963 at the request of President John F. Kennedy to involve the private bar in providing legal services to address racial discrimination. The principal mission of the Lawyers' Committee is to secure, through the rule of law, equal justice under law, particularly in the areas of fair housing and fair lending, community development, employment, voting, education and environmental justice. For more information about the LCCRUL, visit www.lawyerscommittee.org.
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