Industry NewsMortgage

States get room to regulate lending

High court rules against 'expansive' definition of pre-emption

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Federal law doesn't entirely pre-empt states from passing consumer-protection laws governing national banks and seeking to enforce those laws in court, the U.S. Supreme Court held today.The 5-4 decision was a defeat for the banking industry and the Office of the Comptroller of the Currency, the federal regulator that maintained only it had the power to conduct bank examinations or enforcement actions against national banks.The banking industry has warned that if states can adopt and enforce their own regulations, banks will be subject to a "patchwork" of rules, creating additional regulatory compliance costs that are passed on to consumers.Consumer groups have argued that federal regulators have been lax in enforcing fair lending laws, and that additional involvement by the states is needed.The Obama administration's proposed reorganization of the financial regulatory system would protect the right of states to build upon mortgage lending rules to be drawn up by a new consume...