The U.S. Supreme Court, in a 5-4 opinion written by Justice Antonin Scalia, gave state attorneys general a limited victory in their efforts to investigate national banks, partly eroding the primacy enjoyed by the U.S. Officer of the Comptroller of the Currency since the nineteenth century. In Cuomo v. Clearing House, the Court decided that the New York State attorney general could pursue state fair-lending laws, turning away the banks and OCC’s argument that federal law superceded state statutes.
The case goes back to 2005, when then-New York State attorney general Eliot Spitzer requested non-public information from several banks—including Citigroup, JPMorgan Chase, and Wells Fargo—regarding their lending practices. A group of banks, and the OCC, filed separate lawsuits to block the probe. The Supreme Court ruled that the states attorneys general have the right to enforce their own state fair-lending laws.
Comptroller of the Currency John Dugan issued a tactful statement following the decision: “While the OCC naturally is disappointed that the Court disagreed with the OCC’s interpretation of the scope of visitorial powers under the National Bank Act, everyone benefits from clarification of the law.” The OCC is serious about fair lending rules, he noted, and will work very hard with the states to make sure such laws are enforced.
The American Bankers Association was far less sanguine, however. “This decision, which invalidates the OCC’s interpretation reflected in its regulation, changes over 140 years of settled law,” according to a statement put out by ABA president and chief executive officer Edward Yingling, warning that the absence of a uniform regulation and enforcement will make it difficult to meet customer needs in a “mobile society where people and bank services move constantly across state lines.”
John Clooney, a partner at law firm Venable LLP and former assistant U.S. solicitor general, calls the decision a “rare defeat for the OCC,” and believes that national banks will be subject to another layer of scrutiny. “Implicitly, the decision will allow the states attorneys general to enforce other state consumer protection statutes against national banks.” That will lead to more probes and enforcement moves by the states, Clooney cautions.
But Seth Galanter, of counsel at Morrison Foerster, believes the Court’s decision is “basically a little shift in law in favor of the states attorneys general, and the impact on banks will be pretty small.” The states can now sue like other private parties, but they cannot subpoena information from banks without meeting a rigorous standard that such discovery is warranted, says Galanter. “The banks will be additionally burdened, but this won’t be a supervisory burden,” he adds.