The U.S. Supreme Court has made a decision on whether states can investigate federally regulated financial institutions.
The case revolves around letters sent by New York’s attorney general in 2005 to various national banks asking for information about their lending practices, according to a published decision from the Supreme Court. The state was attempting to determine whether its fair-lending laws had been violated.
The banks, along with the U.S. Comptroller of the Currency and a trade group, filed a lawsuit attempting to block New York from its investigation. They claimed that the National Bank Act, which was enacted in 1864, prohibited enforcement of state laws because OCC’s authority pre-empted any state authority.
A federal district court agreed with the banks and entered an injunction prohibiting the attorney general from enforcing state fair-lending laws through judicial proceedings or record demands. The Second Circuit court affirmed the district court’s decision.
But the Supreme Court disagreed.
“The Comptroller’s regulation purporting to pre-empt state law enforcement is not a reasonable interpretation of the NBA,” their decision today stated. “Evidence from the time of the NBA’s enactment, this court’s cases, and application of normal construction principles make clear that the NBA does not prohibit ordinary enforcement of state law.”
The decision didn’t sit well with bankers.
“We’re disappointed that the Supreme Court has decided to question the OCC’s role as the exclusive regulator for national banks,” American Bankers Association President and Chief Executive Officer Edward L. Yingling said in a statement. “This decision, which invalidates the OCC’s interpretation reflected in its regulation, changes over 140 years of settled law.”
Yingling warned that the patchwork of state laws will lead to conflicting federal and state regulation and conflicting enforcement actions while making it more difficult to serve today’s high-tech and mobile consumers.
Comptroller of the Currency John C. Dugan indicated in a press release that he was disappointed with the decision but promised to work with the states.
“I want to stress that the OCC is absolutely committed to strong oversight and enforcement of the fair lending laws, and that the OCC and the states share a common goal of ensuring fair access to financial services and fair treatment of consumers and businesses by all financial firms,” Dugan stated.
CUOMO, ATTORNEY GENERAL OF NEW YORK v. CLEARING HOUSE ASSOCIATION, L. L. C., ET AL.
