States May Probe National Banks For Discrimination The Supreme Court has ruled on a case that pitted state attorneys general against national banks and their federal regulator. The court ruled that states may enforce their own fair-lending laws against national banks — if they go through the courts. Proponents say it's a big win for consumers.
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States May Probe National Banks For Discrimination

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States May Probe National Banks For Discrimination

States May Probe National Banks For Discrimination

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DAVID GREENE, host:

Yesterday the Supreme Court ruled on a case that pitted state attorneys general against national banks and their federal regulator. In a 5-4 decision the court ruled that states can enforce their own fair-lending laws against national banks if they go through the courts. Proponents say it's a big win for consumers.

From member station WNYC, Lisa Chow reports.

LISA CHOW: In 2005, Eliot Spitzer, then-New York attorney general, wanted to investigate bank lending practices. Specifically, Spitzer wanted to know whether Wells Fargo, HSBC, JPMorgan Chase, and Citigroup were charging a disproportionate number of black and Hispanic customers higher interest rates on home mortgages. He subpoenaed the banks for the information. But they said no, that as a state regulator he didn't have the authority to examine the records, only the federal government did. Former New York Attorney General Spitzer.

Mr. ELIOT SPITZER (Former New York Attorney General): We said, wait a minute, we are enforcing civil rights laws that are at the very core of what a state needs to enforce. They said, too bad, you can't do it.

CHOW: The banks' regulator, the office of the comptroller of the currency, backed the banks and they sued New York's attorney general. An Appeals Court ruled in favor of the banks and the federal agency. Justice Antonin Scalia, writing for the majority yesterday, reversed that decision in part. He said the New York attorney general's office couldn't on its own require national banks to hand over information, but it could pursue legal action through the courts. Spitzer says the ruling is a victory for New York and the 49 other states which backed it's case.

Mr. SPITZER: The states will be able to go to the banks and make sure that they are lending fairly, that they are not treating people differently because of race, gender, etc., and that matters.

CHOW: So what effect will this ruling have? In New York, the changes will be immediate. Jane Azia is with the state's banking department in charge of consumer protection issues. She says every day she receives complaints from consumers about everything from credit card fees to loan modifications. Normally, she would forward them along to the office of the comptroller of the currency.

Ms. JANE AZIA (New York State Banking Department): We really didn't know what they did with the complaints once they received them. But now when we receive complaints that we think show a violation of state law, we can also refer those complaints to our state attorney general to take enforcement action on.

CHOW: On a broader scale, the impact is not as clear. Seth Waxman, an attorney at WilmerHale, represented the banks before the Supreme Court.

Mr. SETH WAXMAN (Attorney): At this point I think it is quite a bit too early to tell what real world impacts today's decision will have.

CHOW: Rick Fischer is a banking attorney with Morrison & Foerster. He says one result is clear: national banks will be fighting more lawsuits.

Mr. RICK FISCHER (Attorney): Because obviously the Second Circuit said that states can't sue national banks, and the Supreme Court now has said, yes, they can.

CHOW: And Fischer says that will cost the consumers.

Mr. FISCHER: Ultimately, consumers like you and me pay for everything. If we have expensive efforts in litigation and discovery by state attorneys general, we'll all pay for that.

CHOW: Consumer advocates say it's a price they're willing to pay.

For NPR News, I'm Lisa Chow.

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