Predatory Lending: A Selective Bibliography on States Capacity to Enforce State Consumer Protection Law and State Civil Rights Law as Against National Banks
Introduction
Books on Predatory Lending
Legal Articles Opposing Preemption when it Concerns National Banks
Legal Articles Supporting Preemption When it Concerns National Banks
Papers on Predatory Lending
Relevant Law
Reports on Race Discrimination and Predatory Lending Practices in the Sale of Mortgages
Web-Based Resources
INTRODUCTION
This bibliography, written in reference to the April 28th 2009 oral arguments in the case Cuomo v. Clearing House Assn, L.L.C, 129 S.Ct. 987 (2009), is intended to assist advocates and attorneys who are seeking information on the issue of racial discrimination in predatory lending. In Cuomo, the issue before the U.S. Supreme Court is whether the "visitorial powers" provision, 12 U.S.C. § 484, of the National Bank Act ("NBA") and the corresponding interpretations by the Offices of the Comptroller of Currency ("OCC") prohibit measures taken by the New York State Attorney general to enforce New York state fair lending law against national banks.
In 2005, the then New York Attorney General Elliot Spitzer began investigating the possibility of racial discrimination in the real estate lending practices of several national banks and their operating subsidiaries. The investigation was prompted by data that the federal Home Mortgage Disclosure Act ("HMDA") requires lenders to make public. The HMDA data appeared to indicate that a significantly higher percentage of high-interest home mortgage loans were issued to African-Americans and Hispanic borrowers than to white borrowers.
After an initial inquiry, the OCC, along with a consortium of national banks, successfully enjoined the Attorney Generals investigation by arguing that a recent OCC regulation expansively interpreted the visitorial powers provision of the NBA to preclude state officials from enforcing national banks compliance with state or federal laws.
On appeal, a divided panel on the U.S. Court of Appeals for the Second Circuit upheld the OCC interpretation under the Chevron doctrine. However, dissenting Circuit Judge Cardamone concluded that the OCC could not preempt state law because the Supremacy Clause of the U.S. Constitution grants the power to preempt state law to Congress, not appointed officials in the executive branch, and therefore the Chevron doctrine should not apply.
An affirming decision by the Supreme Court would, in effect, prohibit all state Attorney Generals from enforcing existing state civil right laws against national banks. However, if a majority of the Supreme Court Justices side with the position of Circuit Judge Cardamone and reverse the decision of the lower court, it will be a victory for civil rights activists and the clients they represent.
BOOKS ON PREDATORY LENDING
- Breyer, Stephen, Active Liberty: Interpreting Our Democratic Constitution (New York: Knopf, 2005).
- Katz, Ellis and Tarr, Alan G., Federalism and Rights, (Lanham, Maryland: Roman and Littlefield, 1996).
- Maloy, Richard H.W., Federalism as Seen by the U.S. Supreme Court, (Lake Mary, Florida: Vandeplas Publishing, 2008).
LEGAL ARTICLES OPPOSING OR LIMITING PREEEMPTION WHEN IT CONCERNS NATIONAL BANKS
- Daleiden, Christine, "The Turf Battle Between States and National Banks: What Are States Left With?," 10-MAR Haw. B.J. 24 (2006). Description of the dual banking controversy.
- Ehrenkranz, Chad D., "Can a Bank Have its Cake and Eat it Too?: Why Watters v. Wachovia Wrongly Infers Preemption of State Consumer Protection Law," 16 U. Miami Bus. L. Rev. 139 (2008).
- Fisher, Keith R., "Toward a Basal Tenth Amendment: A Riposte to National Bank Preemption of State Consumer Protection Laws," 29 Harv. J.L. & Poly 981 (2006).
- Jackson, Howell E. and Anderson, Stacy A., "Can States Tax National Banks to Educate Consumers About Predatory Lending Practices?" 30 Harv. J.L. & Pub. Poly 831 (2007). The Article concludes that a state tax of the sort considered in California-imposing modest levies on federally chartered entities but not preventing them from engaging in otherwise authorized activities-should qualify as a legitimate exercise of state taxing power under 12 U.S.C. § 548 and should withstand scrutiny both under the Due Process and Commerce Clauses to the extent the tax is imposed on out-of-state banks
- Laguardia, Francesca S., "Enforcing the Fair Housing Act: Can Agency Interpretations Override Congressional Intent in Anti-Discrimination Legislation?," 9 N.Y.U. Legis. & Pub. Poly 535 (2006).
- Schiltz, Elizabeth R., "Damming Watters: Channeling the Power of Federal Preemption of State Consumer Banking Laws," 35 Fla. St. U. L. Rev. 893 (2008)
LEGAL ARTICLES SUPPORTING PREEMPTION WHEN IT CONCERNS NATIONAL BANKS
- Cayne, Howard N. and Perkins, Nancy L., "National Bank Act Preemption: The OCCs New Rules Do Not Pose a Threat to Consumer Protection or the Dual Banking System," 23 Ann. Rev. Banking & Fin. L. 365 (2004).
- Cole, Marcus G., "Protecting Consumers from Consumer Protection: Watters v. Wachovia Bank," 2007 Cato Sup. Ct. Rev. 251 (2007).
- Duhamel, Marcel C., "Predatory Lending and National Banks: The New Visitorial Powers, Preemption and Predatory Lending Regulations," 121 Banking L.J. 455 (2004).
- Hall, Thomas J., "States Lack Enforcement and Investigative Authority Over National Banks," 125 Banking L.J. 251 (2008). Summary of Second Circuit Decision in Clearing House Assn L.L.C. v. Cuomo.
- Kravetz, Timothy, "National Bank Operating Subsidiaries are Subject to Exclusive Visitorial Authority by OCC as the NBA and OCC Regulations Preempt State Visitorial Authority Law: Watters v. Wachovia Bank," 46 Duq.L.Rev. 279 (2008).
- Sager, Sara, "Preemption Rights of National Bank Operating Subsidiaries: The Fight for Visitorial Powers," 30 J. Corp. L. 181 (2005).
PAPERS ON PREDATORY LENDING
- Bradford, Calvin, "Risk or Race? Racial Disparities and the Subprime Refinance Market," (PDF) Center for Community Change (May, 2002)
- Cohen, Alys and Margot Sanders, "Federal Regulation of Consumer Credit: The Cause or the Cure for Predatory Lending?" (PDF) produced for Building Assets Building Credit: A Symposium on Improving Financial Services in Low-Income Communities, held at Harvard University on November 18-19, 2003.
- Stein, Eric, "Quantifying the Economic Costs of Predatory Lending," (PDF) Coalition for Responsible Lending (October 2001). Estimates that U.S. Borrowers lose $9.1 billion annually to predatory lending practices.
RELEVANT LAW
National Bank Act (12 U.S.C. § 484(a)) "Limitation on Vistorial Powers"
(a) No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized."
OCC Regulation (12 C.F.R. § 7.4000(a)(1)) "General Rule on Visitorial Powers"
(a)(1) Only the OCC or an authorized representative of the OCC may exercise visitorial powers with respect to national banks, except as provided in paragraph (b) of this section. State officials may not exercise visitorial powers with respect to national banks, such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions, except in limited circumstances authorized by federal law. However, production of a bank's records (other than non-public OCC information under 12 CFR part 4, subpart C) may be required under normal judicial procedures.
OCC Regulation (12 C.F.R. § 7.4000(a)(2)(iv)) "Vistorial Powers Include"
(a)(2) For purposes of this section, visitorial powers include: [
]
(iv) Enforcing compliance with any applicable federal or state laws concerning those activities. (emphasis added)
REPORTS ON RACE DISCRIMINATION AND PREDATORY LENDING PRACTICES IN THE SALE OF MORTGAGES
- Washington State Budget and Policy Center, "The High Cost of Subprime Lending in the State of Washington," shows low-income and minority borrowers were more likely to obtain high cost, sub-prime mortgages.
- NCRC, "New Data from the Federal Reserve Suggests Least Well Regulated Mortgage Companies Issued Riskiest Loans" (September 2008).
- NCRC, "Income is No Shield Against Racial Differences in Lending II," (PDF)(July 2008).
- Center for Responsible Lending, "State Shows that Business as Usual in Subprime Lending Amounted to Unfair and Deceptive Practices,"
- University of Minnesota Law School, Institute on Race and Poverty, "Communities in Crisis: Race and Mortgage Lending in the Twin Cities," (PDF) (February 2009).
- AARP Policy and Research, "The Sub-prime Market: Wealth Building or Wealth Stripping for Older Persons," (PDF) (June 2007).
- HUD-Treasury Task Force "Curbing Predatory Home Mortgage Lending," (PDF) (2000).
WEB-BASED RESOURCES
—Compiled by Jaime A. Alonso, April 2009