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Cuomo v. The Clearing House Association: OCC Loses Even with Chevron Deference

posted by Adam Levitin

The Supreme Court delivered its decision in Cuomo v. the Clearing House Association today.  The issue in the case was whether the a regulation passed by the Office of the Comptroller of the Currency (OCC) preempted state enforcement of state fair lending laws against national banks.  Coming on the heels of the OCC's victory in Wachovia v. Watters, in which the Supreme Court held that a state could not exercise visitorial powers over an operating subsidiary of a national bank, many thought that the Supreme Court would extend the OCC's power to near complete preemption of any state authority over national banks. To the surprise of many observers, however, the Court ruled 5-4 (Thomas, with Roberts, Kennedy, and Alito dissenting) in favor of the State of New York (Cuomo).  

Justice Scalia, writing for the majority emphasized the distinction between supervisory powers (where the OCC has a monopoly) and law enforcement (where other federal agencies also have jurisdiction over national banks, as well as states). Although the Supreme Court applied Chevron deference to the OCC's interpretation of the National Bank Act, it still held that the OCC's interpretation was unreasonable.  It's the rare case where an agency gets Chevron deference and losses.  I'm particularly pleased that the Court addressed the reasonableness of the OCC's interpretation under Chevron; it was an issue that they avoided in Watters v. Wachovia, but one that sorely needed attention.  

Hopefully this opinion, combined with the emphasis in the Obama financial restructuring plan on ending federal preemption of state consumer protection laws (federal law will be a floor, not a ceiling), marks a turning point in the long march of federal preemption of state consumer protection laws in financial services, a trend that has really been a focal point of deregulation.  


For the other non-lawyers out there, so you don't need to look this up:

Chevron deference: when a statute is ambiguous and falls within the subject-matter jurisdiction of a federal agency, the agency's official interpretation of the statute, if reasonable, is the last word on the subject. This practise of allowing the agency to say what the law is is known as "Chevron deference."

From: http://everything2.com/title/Chevron%2520deference%2520

Thanks for that clarification on Chevron... Still (as a non-attorney) I am a bit confused. They affirmed the 2nd Cir. on subpoenas? but that the OCCs interpretation on visitorial powers was also unreasonable? So the States can enforce their lending laws but can't subpoena the info to make their case? Or can?... sorry for the stupid question..

csissoko: SCOTUS upheld the injunction against the subpoenas because they were not issued by a judge or as part of a court action overseen by a judge. Cuomo had issued the subpoenas "in lieu of" filing a civil action.

The court found that Cuomo's subpoenas did not constitute the exercise of enforcement power "vested in the courts of justice" which is specifically excluded from the NBA's pre-emption of "supervisory power" exercised by the states. The court also mentioned court supervision of the discovery process during which subpoenas are ordinarily issued as a way of distinguishing the states' enforcement of fair lending laws from the OCC's "visitorial powers."

I hope that helps.

Basically, the Court said no fishing expeditions by A-Gs.

Thanks for cutting to the chase, Adam.

I'm defending foreclosures in NYC with a couple of the pro bono projects-- do you have any thoughts on the decision's practical implications for minority borrowers in default on these predatory loans?

Thanks Catherine and Adam. That clicked... Now I get it..duhh.. I was trying to follow it on SCOTUS(grate blog BTW) also. Sometimes it just does not sink in. Fishing analogy helps as well... So in order for a subpoena to work in that case it has to be in the context of a criminal type of investigation for fraud, supervised or issued by a judge of competent jurisdiction. Tough to get that kind info without someone whistle blowing.. Anyone think the circumstantial evidence on the "percentages" will be enough to bring that type of case?


For private litigants with a state law cause of action there is still a potential preemption question. If it is a state law of general applicability, like an anti-discrimination statute, then I think Cuomo bodes well for the preemption question.

I don't think that Cuomo went to preemption. The OCC didn't have the chutzpah to argue that state antidiscrimination law was preempted, so the entire case concerned enforcement power. (The OCC did argue that it was fully capable of enforcing state antidiscrimination law, which is true as a matter of abstract power, and completely false in a practical sense.)

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