States File Brief In O.c.c. Case
Attorney General Spitzer today announced that New York has filed an amicus brief in the United States Supreme Court opposing attempts by the federal government to shield national banks and their affilates from state laws that protect against abusive financial practices. The brief was joined by 48 other states, the District of Columbia, and Puerto Rico.
"We all stand together in seeking to protect our residents from fraud, abuse, predatory lending and other unscrupulous business practices within our borders," Spitzer said.
New York and the other states filed the legal brief in support of the State of Michigan, which sued the federal government over regulations issued by the U.S. Office of the Comptroller of the Currency (OCC). Those regulations exempt state chartered corporations from their duty to obey state laws when they are operating subsidiaries of nationally-chartered banks.
Specifically, the OCC regulations prevented Michigan from enforcing its lending registration laws against Wachovia Mortgage, a state-chartered mortgage lender owned by a national bank.
The brief urges the Supreme Court to invalidate the OCC's regulation because it completely oversteps the authority given to the agency by Congress. While the OCC is charged with regulating national banks, Congress has not authorized it to act as the primary regulator of state corporations. Rather, in the federal-state system, it is state officials that have primary responsibility for preventing abusive financial practices by state corporations.
In addition, the states contend that OCC devotes the vast majority of its time and resources to monitoring the safety and soundness of financial institutions, and does not have the states' experience, expertise, locally-focused resources or record in addressing consumer protection issues.
If the OCC's rules are allowed to stand, the resulting gap in enforcement will leave many consumers unprotected. States will be powerless to protect their residents from predatory lending and other illegal practices engaged in by state subsidiaries of national banks - practices that cause substantial injury to some of the state's most vulnerable citizens, including low income, elderly and minority homeowners.
The amicus brief was filed on September 1st. Deputy Solicitor General Michelle Aronowitz of the Appeals and Opinions Division led New Yorks effort under the supervision of Solicitor General Caitlin Halligan.