The Supreme Court opened the door for states to enforce fair-lending laws and other consumer protection measures when it struck down a rule that limited such powers to federal banking regulators Monday.
The court decided that rules issued by federal banking regulators back in 1864 under the National Bank Act could not block or pre-empt efforts by the states to enforce their own laws.
This state's rights issue was probably won as Justices remembered the abusive banking policies that were ignored by the Fed and other regulators as the housing bubble inflated.
The case was started in 2005 by then New York Attorney General Eliot Spitzer when he began an inquiry of several national banks including Citigroup, JP Morgan Chase and Well Fargo. He told the banks that he saw "troubling" disparities in minority lending that made it appear as though black and Hispanic borrowers were being charged disproportionately higher interest rates on mortgages compared to those for whites.A banking trade group and the Office of the Comptroller of the Currency brought suit to block Spitzer's inquiry. They took the position that the Bush administration in 2004 gave that kind of law enforcement authority to the comptroller and prohibited such efforts by the states.
Prior to this Supreme Court ruling, state governments had little power to enforce consumer-protection and lending rules, but that won't be true any longer. States can't do the kind of inquiry Spitzer started, but they will have the right to take national banks to court to protect consumer rights.
In a 5-4 decision, the Supreme Court concluded that state attorneys general can go after national banks on matters related to unfair lending practices or discrimination.
Maybe the states can start to protect consumers from the unfair credit card lending practices that seem to be getting worse by the day as credit card companies raise rates in a rush to beat the February deadline for the new credit card laws.
Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Improving Your Credit Score."
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