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Published: March 2009

State regulators must be allowed to protect borrowers

Coalition: Real Bank Reform

Consumer Action signed on to a letter to Treasury Secretary Timothy Geithner and Attorney General Eric Holder urging them to overturn a Bush Administration ruling that weakened the ability of states to investigate and enforce laws against banks in their region.

Below is an excerpt from the letter:

On behalf of the Leadership Conference on Civil Rights (LCCR) and the undersigned civil rights, human rights, labor, and consumer organizations, we respectfully request that you reverse the Bush administration’s position in Cuomo v. The Clearing House Ass’n, L.L.C., currently pending before the U.S. Supreme Court.

As you know, President Obama has acknowledged that there was a massive "failure of oversight and accountability" in our government that now threatens our banking system and entire economy.  A major contributor to that failure was the 2004 adoption of regulations, by the Office of the Comptroller of Currency (OCC), blocking states from investigating or enforcing any state anti-discrimination laws and other state consumer protection laws against national banks and their operating subsidiaries.  

As the foreclosure crisis erupted, the New York Attorney General tried to investigate whether several national banks and their subsidiaries in New York were engaging in racially discriminatory mortgage lending practices by issuing high-interest loans in significantly higher percentages to African-American and Latino borrowers than to White borrowers.  Several studies have already shown that, on a nationwide, industry-wide level, such racial and ethnic disparities did in fact exist – disparities that cannot be explained away by credit scores, income, or other legitimate factors.
                                                
Rather than help, however, the OCC joined a consortium of national banks to sue New York, to prevent Attorney General Cuomo’s investigation and any subsequent enforcement of New York's anti-discrimination laws against national banks.  Relying on the 2004 OCC regulations, the OCC and banks have argued that states cannot enforce their own state laws against national banks and their operating subsidiaries, even when those state laws are not substantively preempted.

In the years since the OCC blocked New York and other states from enforcing their anti-discrimination laws with respect to national banks and their subsidiaries, it is painfully clear that federal regulators did little to fill the void.  The OCC has a very poor record of enforcing state laws; indeed, the OCC had brought no enforcement actions based on violations of state law, and it has failed to train its bank examiners on state laws.  The OCC even has a very poor record of enforcing federal fair lending laws, both in its regulatory oversight and in its referring matters to the Department of Justice or HUD for enforcement.  It is also important to note that federal fair housing and fair lending laws (such as the Fair Housing Act and the Equal Credit Opportunities Act) envision an important state role in anti-discrimination enforcement, something that the OCC’s regulatory interpretation completely ignores, resulting in the elimination of any state role in fighting lending discrimination.

On March 25, 2009, the United States will file its brief in the Supreme Court in Cuomo v. The Clearing House Ass’n, L.L.C. We sincerely hope that you will reverse the Bush administration’s position in this case.  While we are confident in your administration’s commitment to the enforcement of fair, responsible, non-discriminatory lending practices, it is clear that state regulators play a profoundly important role in protecting borrowers and that their efforts must be allowed to continue.

Lead Organization

Leadership Conference on Civil Rights

Other Organizations

LCCR Fair Housing Task Force, National Fair Housing Alliance | ACORN | AFL-CIO | American Association of People with Disabilities | American Arab Anti-Discrimination Committee | Americans for Democratic Action | Asian American Justice Center | Center for Responsible Lending | Common Cause | Consumer Federation of America | Japanese American Citizens League | Lawyers’ Committee for Civil Rights Under Law | NAACP Washington Bureau | National Association of Consumer Advocates | National Association of Human Rights Workers National Association of Social Workers | National Community Reinvestment Coalition | National Consumer Law Center | National Congress of Black Women, Inc. | National Council of La Raza National Urban League | Poverty & Race Research Action Council | Sargent Shriver National Center on Poverty Law | Service Employees International Union

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