NAACP LDF Files Amicus Curiae in the Cuomo v. Clearing House Association Predatory Lending Case

Yesterday, the NAACP Legal Defense and Educational Fund (LDF) along with the Lawyers' Committee for Civil Rights Under Law and the National Fair Housing Alliance filed a friend of the court brief in Cuomo v. The Clearing House Association, LLC. In 2005 the Attorney General for the State of New York launched an investigation into the potentially discriminatory lending practices of national banks, based on data indicating that a significantly higher percentage of high-interest predatory loans were issued to African-American and Hispanic borrowers than to white borrowers. The Office of the Comptroller of the Currency (OCC), a small federal agency within the U.S. Treasury Department, sued to enjoin the New York Attorney General's investigation, and was joined by a consortium of national banks (Clearing House Association). They claimed that states have no authority to enforce their own fair lending laws against national banks. The district court agreed and issued an injunction, in a decision later affirmed by the U.S. Court of Appeals for the Second Circuit. The case is now before the Supreme Court, with argument scheduled for April 28, 2009.

"This case presents the Supreme Court with an ideal opportunity to address the root of our current economic crisis. This will place, at the forefront, the impact this crisis has and continues to have on minority communities," said John Payton, President and Director-Counsel.

In the brief LDF and the other amici argue that Congress never intended a federal agency, especially one with such limited oversight capacity as the OCC, to prevent states from enforcing their own fair lending and anti-discrimination laws. Rather, Congress clearly realized that vigorous state enforcement should play an important role to address the nation's history of lending discrimination, which has contributed significantly to the current foreclosure crisis. Many states have been leaders in combating predatory lending whereas OCC has been a creature of the national banks, in part because its budget is funded by bank fees.

The brief also describes the entrenched nature of lending discrimination in the United States. For much of the twentieth century, many banks redlined minority neighborhoods, often with tacit support from government agencies. Even when loans were available, minority borrowers were significantly more likely to receive subprime loans than similarly situated white borrowers. Such predatory lending, much of it by national banks, contributed to a surge in foreclosures across the country, with devastating consequences especially in minority communities. Amidst the current economic crisis, this is a time when more—not less—enforcement of fair lending laws is needed, so it is especially disheartening that the OCC would try to prevent states from enforcing such laws now.

LDF received assistance in the preparation of this brief from the Stanford Law School Supreme Court Litigation Clinic and Howe & Russell P.C.