The U.S. Supreme Court today ruled that states can apply some of their own laws to big national banks operating within their borders, a decision proponents called a huge win for consumers and for states seeking more power to regulate financial activities.
The high court ruled that a state attorney general cannot on his own issue a subpoena against a bank that has branches in that state and others. However, the court also said that national banks are subject to some state laws under the National Banking Act, and an attorney general can go to court to enforce those laws.
“What this decision today says is that states have the ability to enforce their own laws (against national banks) as long as they follow state due process procedures, which generally mean issuance of a subpoena which can be challenged in court,” said lawyer John Cooney, a former assistant solicitor general and deputy general counsel at the Office of Management and Budget.
Officials say the 5-4 decision opens the door for states to do their own investigations of national banks, as long as they can convince a judge that investigations are needed.
New York Attorney General Andrew Cuomo called the decision “a huge win for consumers across the nation.”
“I am pleased that the court has turned back efforts by the nation’s largest banks to prevent the efforts of New York and other states to protect consumers from predatory financial practices,” Cuomo said. “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.”
Comptroller of the Currency John C. Dugan said he was disappointed by the court’s ruling.
“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 said. “We look forward to working with the states to ensure that these important objectives are met.”
The case is Cuomo v. The Clearing House Association, 08-453. (AP)
