By The Editors

The U.S. Supreme Court today declared that the nation’s laws banning discrimination in lending can and should be enforced by all levels of government, not just federal agencies.

The ruling in the Cuomo v. Cleaing House Association case, decided on a narrow 5 to 4 basis on the last day of the Court’s spring term, means that attorneys general can investigate whether nationally-chartered banks are violating laws against discrimination in lending in their states. Legal experts said the ruling adds a potentially powerful level of support to expanding access to the capital markets for women and people of color.

Agitation for stronger enforcement of fair-housing and fair-lending laws has grown as the impact of the nation’s housing crisis has sharply pared the number of black and Hispanic homeowners. Numerous recent studies have shown that banks and other lending institutions continue to routinely push blacks and Hispanics to accept higher-cost subprime mortgages – even when their credit histories are good. That kind of discriminatory behavior has significantly contributed to the disproportionate foreclosure rate of black and Hispanic homeowners.

The case began in 2005 with the efforts of Eliot Spitzer, then Attorney General of New York, to examine the lending practices of national banks within New York State. They were continued by his successor, Andrew Cuomo.

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.  But those institutions rebuffed Cuomo’s requests for “certain nonpublic information” about their lending practices and joined the Office of the Comptroller of the Currency (OCC), a small agency within the U.S. Treasury Department, and an association of national banks in suing to block Cuomo’s investigation. The federal agency asserted that New York state officials were trespassing on the powers only it had.

But the majority of the Court dismissed that position, declaring that the federal agency’s authority could not be used to, in effect, shield national lending institutions from states’ efforts to enforce their own fair-lending laws.

The NAACP Legal Defense and Educational Fund (LDF) filed a friend-of-the-court brief supporting Andrew Cuomo’s position in the case.

John Payton, LDF’s President and Director-Counsel, said today’s decision “in Cuomo v. Clearing House Association … permits states to step up their efforts to curb discrimination in sub-prime lending markets, and is especially timely given that predatory lending has exacerbated the impact of the current economic crisis on minority communities.”   

Payton added that “As the Court clearly recognized, this is a time when more—not less—enforcement of fair lending laws is essential. 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.”

LDF officials noted that Justice Scalia’s majority opinion “correctly rejected the federal agency’s attempt ‘to do what Congress declined to do: exempt national banks from all state banking laws, or at least state enforcement of those laws.’” Payton and others contended the Court decision “restores the collaborative federal-state regulatory scheme that Congress designed to address the persistence of lending discrimination, which has contributed to the recent surge in foreclosures nationwide … effective financial reform legislation must ensure that both state and federal regulators can take decisive action against lending discrimination wherever and whenever it occurs.”