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Dreher Tomkies LLP
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Columbus, Ohio 43215
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COURT ENJOINS N.Y. A.G. FROM ENFORCING STATE LAWS AGAINST NATIONAL BANKS

The U.S. District Court for the Southern District of New York has permanently enjoined New York Attorney General Eliot Spitzer from enforcing the state’s fair lending laws against national banks and their operating subsidiaries. See Office of the Comptroller of the Currency v. Spitzer, No. 05 Civ. 5636 (SHS), 2005 WL 2513815 (S.D.N.Y. 2005); The Clearing House Association, LLC v. Spitzer, No. 05 Civ. 5629 (SHS), 2005 WL 2513826 (S.D.N.Y. 2005). Two opinions were issued by the court, one in the case brought by the Office of the Comptroller of the Currency and the other in the case brought by The Clearing House Association, an association of banks that includes national banks. Both plaintiffs sought declaratory and injunctive relief to stop the New York Attorney General from investigating national banks and their operating subsidiaries in an attempt to enforce New York’s fair lending laws that are designed to prevent racial discrimination. The plaintiffs argued that the state was infringing on the OCC’s exclusive visitorial authority by its actions.

The OCC did not challenge the applicability of state anti-discrimination laws to national banks but rather focused on the Attorney General’s attempt to enforce the law against national banks including requests books and records.

The court found that the OCC’s regulation on visitorial powers (12 C.F.R § 7.4000) reflected a reasonable interpretation of Section 484 of the National Bank Act and is therefore entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). Thus, the court enjoined the Attorney General from subpoenaing and inspecting the books and records of national banks and from instituting any enforcement actions relating to fair lending.

In so ruling, the court dispensed with the Attorney General’s argument that First National Bank in St. Louis v. Missouri, 263 U.S. 640 (1924), conclusively established that states could sue national banks to enforce non-preempted state laws. The court noted that in St. Louis, the national bank was acting entirely outside the powers granted by federal law and engaging in activity prohibited by state law. At that time, the OCC’s authority to enforce national bank compliance with state banking law was not as clear as under current Section 7.4000 and so the state was permitted to pursue a quo warranto action to fill a gap in the law, circumstances unlike those present in OCC v. Spitzer. The court therefore found St. Louis inapposite and unpersuasive in the face of modern precedent discussed by the court and circumstance.

An additional issue addressed in the Clearing House Association case was the ability of the Attorney General to proceed against a national bank for alleged violations of the federal Fair Housing Act under that statute. The Attorney General argued that the Fair Housing Act provided an implicit exception to Section 484 of the National Bank Act. However, the court concluded that actions in a state’s parens patriae capacity constitute a form of visitorial authority prohibited by the National Bank Act and that an implicit exception cannot be read into Section 484 under the circumstances. Thus, the court enjoined the Attorney General from instituting any judicial actions based on the state’s parens patriae authority to enforce the federal Fair Housing Act.

Elizabeth Anstaett and Mike Tomkies