States Get More Power to Challenge National Banks

Wall Street Journal
June 30, 2009
Paletta, Damian; Kendall, Brent
P. A4

In a June 29 ruling by the U.S. Supreme Court in the case of Cuomo v. Clearing House Association, state attorneys general were given the authority to sue national banks for alleged unfair lending. State AGs now can sue any of some 1,500 national banks for engaging in such practices as "redlining," which occurs when banks charge minorities more for loans or refuse to write loans in certain communities. "With this decision, the court has recognized that fair lending and consumer protection -- the cornerstones of a sound economy -- require the cooperative efforts of both the states and the federal government," stated New York A.G. Andrew Cuomo. Experts say the ruling -- a welcome surprise to state officials and consumer advocates whose previous challenges to the National Bank Act of 1864 were unsuccessful -- could play a major role in reform of the financial regulatory system. However, the National Consumer Law Center and other organizations said they would continue their campaigns for the creation of new federal policies that would give states the power to enforce even tougher consumer-protection laws against national banks.