Correspondence from Pamela Karlan to Virginia Cooper Re Whitfield v. Clinton

    No. 08-453

In The

Supreme Court of tip ptutirfr J^iatrs

ANDREW W. Cu o m o , in his Official Capacity as Attorney 
General for the State of New York,

Petitioner,
v.

The Clearing  House  Asso ciatio n , L.L.C., and Office  of 
the  Com ptroller  of  the  C urrency ,

Respondents.

On Writ of Certiorari to the United States Court of Appeals 
for the Second Circuit

BRIEF OF LAWYERS’ COMMITTEE FOR CIVIL 
RIGHTS UNDER LAW, NATIONAL FAIR HOUSING 

ALLIANCE, AND NAACP LEGAL DEFENSE AND 
EDUCATIONAL FUND, INC. AS AMICI CURIAE IN 

SUPPORT OF PETITIONER

Joseph D. Rich 
Law yers ’ Com m ittee  for  
Civil R ights Un der  Law  
1401 New York Ave. NW 
Suite 400
Washington, DC 20005

Pamela S. Karlan 
Jeffrey Fisher 
Stanford  Law  School 

Supreme  Court 
Litigation  Clinic  

559 Nathan Abbott Way 
Stanford, CA 94305

Amy Howe 
Counsel of Record 

Kevin K. Russell 
How e  & Ru ssell , P.C. 
7272 Wisconsin Ave. 
Suite 300
Bethesda, MD 20814 
(301) 941-1913

[Additional counsel listed on inside cover]
W ilson-Epes Printing Co ., Inc. -  (202) 789-0096 -  Washington, D. C. 20002



AD D ITIO N AL COUNSEL

Joshua Civin 
NAACP Legal Defense  

and  Educational  Fu n d , 
In c .

1444 I Street NW 
Washington, DC 20005

John Payton
Director-Counsel 

Jacqueline A. Berrien 
Debo P. Adegbile 
Joy Milligan 
NAACP Legal  Defense  

and  Educational Fu n d , 
In c .

99 Hudson Street,
Suite 1600
New York, NY 10013



1

TABLE OF CONTENTS

INTEREST OF AMICI CURIAE....................................1
SUMMARY OF ARGUMENT........................................ 1
ARGUMENT...........................   4
I. Congress Intended To Preserve An Important

Role For The States In Fair Lending 
Enforcement............................................................... 4
A. The Federal Fair Lending Statutory 

Scheme Envisions Dual Enforcement of 
Fair Lending Laws.............................................4

R. In Riegle-Neal, Congress Intended For 
OCC To Complement, Not Preclude, 
State Fair Lending Enforcement Efforts.......9

II. The Long History Of Racial Discrimination
Demonstrates The Need For A Dual Federal 
And State Fair Lending Enforcement 
Structure................................................................... 12
A. The Public And Private Sectors Each

Mutually Reinforced The Other’s 
Discriminatory Lending Practices In 
Ways That Have Had Intergenerational 
Effects.................................................................12

B. Federal Remedial Legislation Has Failed
To Solve Racial Lending Disparities.............17

III. Lending Discrimination Persists And Plays
An Important Role In The Ongoing 
Foreclosure Crisis And The Elimination Of 
Wealth Accumulated By Minorities..................... 22



11

A. Lenders Continue To Deny Minorities
Access To Credit Through Redlining And 
Disparate Treatment Of Minority 
Applicants......................................................... 23

B. The Present Credit Crisis Reflects A New
Discriminatory Pattern Of Targeting 
Minorities For High-Cost, Subprime 
Loans.................................................................26

C. As A Result Of Reverse Redlining In The
Home Lending Industry, Minorities 
Account For A Disproportionate Share Of 
Subprime Mortgages.......................................27

D. Discriminatory Lending In The Mortgage
Industry Frustrates Upward Mobility 
And Eliminates Wealth Accumulated By 
Minorities.......................................................... 29

IV. In Light Of OCC’s Limited Enforcement
Capacity, The States Are Especially Well-
Suited To Serve As Dual Enforcers Of Their
Own Fair Lending Laws.........................................32
A. OCC Is Not Equipped To Act As The

Exclusive Enforcer Of State Fair Lending 
Laws...................................................................32

B. States Are Well Suited To Enforce State
Fair Lending Laws...........................................35

CONCLUSION...............................................................39
APPENDIX......................................................................la



I l l

TABLE OF AUTH ORITIES

Cases

Adarand Constructors, Inc. v. Slater, 228 F.3d 
1147 (10th Cir. 2000), cert, dismissed sub 
nom. Adarand Constructors v. Mineta, 534 
U.S. 103 (2001) (per curiam ).................................. 16

Buchanan v. Warley, 245 U.S. 60 (1917)...................13
Gregory v. Ashcroft, 501 U.S. 452 (1991).................. 10
Johnson v. Equicredit Corp., No. 1C5197, 2002 

WL 448991 (N.D. 111. Mar. 22, 2002)..................... 24
Mayor o f Baltimore u. Wells Fargo Bank, No.

l:08-CV-00062 (D. Md. Jan. 8, 2008)..................... 26
NAACP v. Harris, 567 F. Supp. 637 (D. Mass.

1983).............................................................................15
NAACP v. Sec’y o f HUD, 817 F.2d 149 (1st Cir.

1987).........................................................  15
New York v. United States, 505 U.S. 144 (1992)..... 37
Printz v. United States, 521 U.S. 898 (1997).............37
Rice u. Santa Fe Elevator Corp., 331 U.S. 218

(1947)............................................................................10
Shelley v. Kraemer, 334 U.S. 1 (1948).........................13
Thompson v. U.S. Dep’t ofHous. & Urban Dev.,

348 F. Supp. 2d 398 (D. Md. 2005)..........................15
Trafficante v. Metro. Life Ins. Co., 409 U.S. 205 

(1972).........................   19
United States v. Centier Bank, No. 2:06-CV-344 

(N.D. Ind. Oct. 13, 2006)................................... 23, 24



IV

United States v. Deposit Guar. Nat’l Bank, No. 
3:99-CV-00670-STL (S.D. Miss. Sept. 29,
1999).............................................................................34

United States v. Fid. Fed. Bank, No. l:02-cv- 
03906-NG-MDG (E.D.N.Y. July 8, 2002)................ 27

United States v. First Am. Bank, No. 1:04-CV- 
4585 (N.D. 111. July 13, 2004)................................. ..24

United States v. Old Kent Fin. Corp., No. 04- 
71879, 2004 WL 1157779 (E.D. Mich. May 19,
2004)..........   24

Wyeth v. Levine, slip op. (Mar. 9, 2009)...................... 10
Federal Statutes

12 U.S.C. §36 ............... ...........................................10, 11
12 U.S.C. §2902..............................................................22
12 U.S.C. §2903..............................................................22
15 U.S.C. § 1613..............................................................20
15 U.S.C. § 1691................................................................8
15 U.S.C. § 1691c...................................................... 7, 20
15 U.S.C. § 1691d..............................................................7
15 U.S.C. § 1691e....................................................20, 34
15 U.S.C. § 1691f........................................................... 20
42 U.S.C. § 3604..............................................................17
42 U.S.C. § 3605..............  17
42 U.S.C. § 3608........................................................ 6, 21
42 U.S.C. § 3610....................................................5, 6, 19
42 U.S.C. § 3614..............................................................19
42 U.S.C. §3615........................................................ 7, 19
42 U.S.C. § 3616..............................................   7



V

Housing and Community Development Act, Pub.
L. No. 93-383, 88 Stat. 633 (1974)............................8

Community Reinvestment Act, Pub. L. No. 95- 
128, tit. VIII, 91 Stat. 1111 (1977).........................17

Equal Credit Opportunity Act, Pub. L. No. 93- 
495, 88 Stat. 1521(1974).................................passim

Fair Housing Amendments Act of 1988, Pub. L.
No. 100-430, 102 Stat. 1619........................................5

Home Mortgage Disclosure Act, Pub. L. No. 94- 
200, tit. Ill, 89 Stat. 1125 (1975)............................17

Home Owners Loan Act of 1933, Pub. L. No. 73- 
43, 48 Stat. 128 (1933)...............................................13

National Housing Act of 1934, Pub. L. No. 73- 
479, 48 Stat. 1246....................................................... 14

Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994, Pub L. No. 103-328,
108 Stat. 2338 ....................................................passim

Title VIII of the 1968 Civil Rights Act, Pub. L.
No. 90-284, 82 Stat. 81......................................passim

State Statutes
Ala. Code § 24-8-1........................................................ 35
Ca l . G o v ’t  C o d e  § 12955..............................................35
Del. Code Ann. tit. 6, § 4600......................................35
Ga . C ode  Ann. § 8-3-200............................................. 35
H a w . R e v . S t a t . § 515-1.............................................. 35
Ka n . St a t . A n n . § 44-1015..........................................35
La . R e v . S t a t . A n n . § 50:2601.................................... 35
N.C. Gen. Stat. Ann. § 41A-1.................................... 35
N.Y. E x e c . Law § 296-a................................................. 1



VI

N.Y. Exec. Law § 290 ................................................. ..35
R. I. Gen. Laws § 34-37-1............................................. 35
S. C. Code Ann . § 31-21-10.......................................... 35
Tex. Prop. Code Ann . § 301.001................................ 35
Utah Code Ann . § 57-21-1.......................................... 35
Va . Code Ann. § 36-96.1.............................................. 35
Wis. Stat. § 106.50....................................................... 35

Legislative M aterials

140 Cong. Rec. H6777 (daily ed. Aug. 4, 1994)...... 12
Credit Card Practices: Current Consumer and 

Regulatory Issues: Hearing Before the 
Subcomm. on Financial Institutions and 
Consumer Credit o f the H. Comm, on 
Financial Services, 110th Cong. (2007)................. 33

Equal Educational Opportunity, Part 5 — De 
Facto Segregation and Housing 
Discrimination: Hearings Before the S. Select 
Comm, on Equal Educational Opportunity,
91st Cong. (1970).........................................   15

H. Comm, on Fin. Servs., 108th Cong., V iews 
and Estimates of the Committee on 
Financial Services on Matters to Be Set 
Forth in the Concurrent Resolution on 
the Budget for Fiscal Year 2005.........................33

H.R. Rep. No. 100-711 (1988).........................................5
H.R. Rep. No. 103-651 (1994) (Conf. Rep.), as 

reprinted in 1994 U.S.C.C.A.N. 2068......................11
Nat’l Comm’n on Urban Problems, Building 

the American City, H.R. Doc. No. 91-34 
(1968)............................................................................13



vn
Rooting Out Discrimination in Mortgage 

Lending: Using HMD A as a Tool for Fair 
Lending Enforcement: Hearing Before the 
Subcomm. on Oversight and Investigations o f 
the H. Financial Serv. Comm., 110th Cong.
(2007)........................................................................... 25

S. R e p . N o . 93-902 (1974), as reprinted in 1974 
U.S.C.C.A.N. 6119...............  8

Regulations

24C.F.R. § 115.300.......................................................... 7
Authority of Agencies in the Fair Housing 

Assistance Program To Investigate 
Allegations of Discrimination in Lending 
Complaints, 71 Fed. Reg. 33,138 (June 7,
2006)...............................................................................6

Other Authorities

M a r t in  D. A b r a v a n e l  & M a r y  K. C u n n in g h a m ,
How M u c h  Do W e K n o w ? P u b lic  A w a r e n e ss  
o f  th e  N a t io n ’s Fa ir  H o u s in g  La w s  (2002)........18

William C. Apgar & Allegra Calder, The Dual 
Mortgage Market: The Persistence o f 
Discrimination in Mortgage Lending (Joint 
Ctr. for Hous. Studies, Harvard Univ.,
Working Paper No. W05-11, 2004)..........................22

W il l ia m  C. A p g a r  & M a r k  D u d a ,
H o m e o w n e r s h ip  P r e s . F o u n d ., C o l l a t e r a l  
D a m a g e : T h e  M u n ic ip a l  Im p a c t  o f  T o d a y ’s 
M o r tg a g e  F o r e c lo su r e  B o o m  (2005)...........31, 32

Vikas Bajaj & Ron Nixon, For Minorities, Signs 
o f Trouble in Foreclosures, N.Y. TIMES, Feb.
22, 2006, at A1.....................................................29, 30



V ll l

Michael S. Barr, Credit Where It Counts: The 
Community Reinvestment Act and Its Critics,
80 N.Y.U. L. Rev 513 (2005)........... ........................ 18

Paul Beckett & Jess Bravin, Friendly Watchdog: 
Federal Regulator Often Helps Banks Fighting 
Consumers—Dependent on Lenders’ Fees,
OCC Takes Their Side Against Local, State 
Laws—Defending Uniform Rules, WALL St . J.,
Jan. 28, 2002, at A 1 ..................................................34

Black’s Law Dictionary (8th ed. 2004)................... 11
Calvin Bradford, Financing Home Ownership:

The Federal Role in Neighborhood Decline,
14 URB. Aff. Rev. 313 (1979)............................ 13, 21

Cal. Reinvestment Coal., Who Really Gets 
Higher-Cost Home Loans? (2005)................. 29, 34

William J. Collins, The Political Economy of 
State Fair Housing Laws Before 1968, 30 Soc.
Sci. H is t . 15 (2006).............................................. 4, 38

Ctr. for Responsible Lending, Race Matters:
The Concentration of Payday Lenders in 
African American Neighborhoods in North 
Carolina (2005)......................................................... 27

Ctr. for Responsible Lending, Updated 
Projections of Subprime Foreclosures in 
the United States and Their Impact on 
Home Values and Communities (2008)................ 30

Stephen M. Dane, Eliminating the Labyrinth: A  
Proposal to Simplify Federal Mortgage 
Lending Discrimination Laws, 26 U. MlCH.
J.L. Ref. 527 (1993)...................................................18

Federal Reserve Board, Annual Report 2004..... 20



IX

Manny Fernandez, Study Finds Disparities in 
Mortgages by Race, N.Y. TIMES, Oct. 15, 2007, 
at A 2 0 .......................................................................... 28

David N. Figlio, Bank Consolidations and 
Minority Neighborhoods, 45 J. Urb. Econ. 474 
(1999)........................................................................... 24

J o h n  G o e r in g  & R o n  W ie n k , M o r tg a g e  
L e n d in g , R a c ia l  D is c r im in a t io n , a n d  
F e d e r a l  P o l ic y  (1996)................................  21

H U D , A ll  O t h e r  T h in g s  B e in g  E q u a l : A  
Pa ir e d  T e s t in g  St u d y  of  M o r tg a g e  L e n d in g  
In st it u t io n s  (2002).................................................. 25

HUD, Fair Housing Assistance Program 
Agencies, http://www.hud.gov/offices/fheo/ 
partners/FHAP/agencies.cfm......................................5

Keith N. Hylton & Vincent D. Rougeau, Lending 
Discrimination: Economic Theory,
Econometric Evidence, and the Community 
Reinvestment Act, 85 G e o . L.J. 237 (1996).............. 22

Dan Immergluck & Geoff Smith, The Impact o f  
Single-Family Mortgage Foreclosures on 
Neighborhood Crime, 21 HOUS. STUD. 851 
(2006)........................................................................... 31

D a n  Im m e r g l u c k , C r e d it  to  th e  C o m m u n it y  
(2004).......................      passim

Dan Immergluck, From the Subprime to the 
Exotic: Excessive Mortgage Market Risk and 
Foreclosures, 74 J. A m . P l a n . A s s ’N 59 (2008)......30

K e n n e t h  T. J a c k s o n , C r a b g r a ss  F r o n tie r
(1985)...................................................... ...... .12, 14, 15

D u a n e  L o c k a r d , T o w a r d  E q u a l  O pp o r t u n it y  
(1968).......................................................................... 13



X

Kai-yan Lee, Fed. Reserve Bank of Boston, 
Foreclosure’s Price-Depressing Spillover 
Effects On Local Properties (2008).................. 31

James Loewen, Sundown Towns (2005).................. 13
Douglas S. Massey & Nancy A. Denton,

American Apartheid 51 (1993)................13,14,17
Nat’l Cmty. Reinvestment Coal., Income Is 

No Shield Against Racial Differences in 
Lending II (2008)...................     28

Nat’l Comm’n on Fair Housing and Equal 
Opportunity, The Future of Fair Housing 
(2008)....................................................... 18, 19, 20, 28

Neighborhood Econ. Dev. Advocacy Project,
Rapid Rip-Offs: Tax Refund Anticipation 
Lending in New York City (2006)..............26,27

OCC, Annual Report, Fiscal Year 2005 (2005)..... 33
OCC, Community Reinvestment Act 

Examination Procedures (1997)...........................22
Melvin Oliver, Univ. of Cal. -  Santa Barbara, 

Testimony at the National Commission on 
Fair Housing and Equal Opportunity (Sept. 9,
2008).............................................................................30

Christopher L. Peterson, Preemption, Agency 
Cost Theory, and Predatory Lending by 
Banking Agents: Are Federal Regulators 
Biting Off More Than They Can Chew?, 56
Am . U. L. Rev. 515 (2007).................................. 36, 38

Random House Webster’s College 
Dictionary (2000)....................................................11

John P. Reiman, Foreclosures, Integration, and 
the Future o f the Fair Housing Act, 41 IND. L. 
REV. 629 (2008)................................................... 26



XI

R e p o r t  o f  th e  N a t io n a l  A d v is o r y  C o m m issio n  
o n  C iv il  D iso r d e r s  (1968)......................................17

Michael H. Schill & Susan M. Wachter, The 
Spatial Bias o f Federal Housing Law and 
Policy: Concentrated Poverty in Urban 
America, 143 U. Pa . L. R e v . 1285 (1995)................ 15

Ellen Schloemer et al., Ctr. for Responsible 
Lending, Losing Ground: Foreclosures in  
the Subprime Market and Their Cost to 
Homeowners (2006)................................................. 31

R o b e r t  G. S c h w e m m , H o u sin g  D is c r im in a t io n  
(1st. ed. 1990)............................................................... 5

Javier Silva & Rebecca Epstein, Costly 
Credit: African Americans and Latinos in 
Debt (2005)....................................   27

N o r m a n  J. S in g e r  & J.D . S h a m b ie  S in g e r ,
Sta t u t e s  a n d  St a t u t o r y  C o n str u c tio n
(7th ed. 2007).............................................................   11

G r e g o r y  D. S q u ir e s  & C h a r l e s  E. K u b r in , 
P r iv il e g e d  P l a c e s : R a c e , R e s id e n c e , a n d  
th e  St r u c t u r e  o f  O p p o r t u n it y

(2006).......................................................23, 26, 27, 29
Gregory D. Squires, The New Redlining, in WHY 

th e  P o o r  Pa y  M ore  1 (Gregory D. Squires 
ed. 2004).............................................................. 24, 26

Peter P. Swire, The Persistent Problem o f  
Lending Discrimination: A Law and 
Economics Analysis, 73 Tex. L. Rev. 787 
(1995).......................................................................... 16

Bob Tedeschi, Safeguarding Against Loan 
Discrimination, N.Y. TIMES, Jan. 23, 2009, at 
RE6 36



X ll

T h e  A t t o r n e y  G e n e r a l ’s 2005 A n n u a l  R e p o r t  
to  C o n g r e ss  Pu r s u a n t  to  th e  E q u a l  Cr e d it  
O p p o r t u n it y  A c t  A m e n d m e n t s  o f  1976..............20

U.S. Dep’t of Justice, Fair Housing Cases, 
http://www.usdoj.gOv/crt/housing/fairhousing/c 
aseslist.htm#l............................................................ 19

U.S. Gen. Accounting Office, Consumer 
Protection: Federal and State Agencies 
Face Challenges in Combating Predatory 
Lending (2004).......................................................... 37

U .S. G e n . A c c o u n t in g  O f f ic e , O CC  
P r e e m p t io n  R u l e s : O CC Sh o u l d  F u r t h e r  
C l a r if y  th e  A p p l ic a b il it y  o f  Sta te  
C o n s u m e r  P r o t e c t io n  L a w s  to  N a t io n a l  
B a n k s  (2006)...............................................................37

C h r is t ia n  E. W e l l e r , C t r . fo r  A m . P r o g r e s s , 
A c c e ss  D e n ie d : L o w  In c o m e  a n d  M in o r it y  
Fa m il ie s  Fa c e  M ore  C r e d it  C o n s tr a in ts  
a n d  H ig h e r  B o r r o w in g  C o sts  (2007)............   25

W o o d st o c k  In s t ., F o r e c l o s u r e s  in  th e  
Ch ic a g o  R e g io n  C o n tin u e  to  G r o w  a t  a n  
A l a r m in g  R a te  (2008).............................................. 30

http://www.usdoj.gOv/crt/housing/fairhousing/c


INTEREST OF AM ICI CURIAE1
Amici are civil rights groups committed to the 

effective enforcement of antidiscrimination and 
consumer protection laws. More details about the 
individual amici are included in the Appendix.

SU M M ARY OF AR GU M EN T

This case demonstrates perfectly why it is 
inconceivable to think that Congress intended for any 
federal agency -  much less the Office of the 
Comptroller of the Currency (“OCC”), with its 
extremely limited resources and oversight capacity -  
to preclude states from vigorously enforcing their 
own fair lending and antidiscrimination laws. In 
2005, the New York Attorney General learned, based 
on data publicly available pursuant to the federal 
Home Mortgage Disclosure Act (HMDA), that several 
national banks had issued a disproportionate number 
of high-interest home mortgage loans to minority 
borrowers. Pet. 10; Pet. App. 68a (citing, e.g., N.Y. 
Ex e c , l a w  § 296-a). Concluding that the data 
established a prima facie case of race discrimination, 
the Attorney General sent letters to several banks 
requesting additional information. Pet. App. 68a.

1 Pursuant to Rule 37.6, counsel for amici states that no 
counsel for a party authored this brief in whole or in part, and 
that no person other than amici, their members, or their counsel 
made a monetary contribution to the preparation or submission 
of this brief. Petitioner and respondent The Clearing House 
Association, L.L.C. have filed global consent letters with the 
Clerk of the Court; a letter of consent from respondent Office of 
the Comptroller of the Currency has been lodged with the Clerk 
of the Court pursuant to Rule 37.3.



2

Although it had access to the same HMDA data 
on which the New York Attorney General relied, OCC 
was not actively investigating the banks in question. 
Nor did it commence a complementary investigation 
of its own upon learning of the Attorney General’s 
letters. Instead, OCC sued to enjoin New York’s 
investigative and enforcement efforts, even before the 
national banks could do so.

OCC’s action cuts at the heart of the overlapping 
regulatory scheme envisioned by Congress. That 
scheme allows states to serve as enforcers of fair 
lending laws alongside the federal government and 
provide a concerted two-part force to address the 
lending discrimination, disinvestment, and decay 
that have long impacted minority communities. By 
asserting exclusive authority to enforce state fair 
lending laws, OCC has improperly assumed exclusive 
power for itself in a vital realm of civil rights 
enforcement, where it is simply inconceivable that 
Congress intended federal agencies to displace states 
from taking robust action to ensure compliance with 
their own laws. Indeed, one recent addition to that 
scheme -  the Riegle-Neal Interstate Banking and 
Efficiency Act -  expressly preserves an important 
role for the states in enforcing fair lending laws.

The federal fair housing statutory scheme 
enacted by Congress thus recognizes that vigorous 
state enforcement can and should play an important 
role to address the nation’s history of lending 
discrimination, which persists into the present and 
has contributed significantly to the current 
foreclosure crisis. Although the private sector 
maintained discriminatory lending policies long 
before the federal government became involved in the



3
lending industry, the government nonetheless bears 
substantial responsibility for this pattern. Beginning 
with the Great Depression, the government 
implemented the same kinds of overt discriminatory 
practices already in use in the private sector, but on 
an unprecedented scale. Although Congress 
eventually enacted legislation intended to eliminate 
lending discrimination, enforcement of those laws 
has been, at best, inconsistent.

More recent discriminatory practices have 
taken new forms. While minorities have historically 
been denied access to credit, national banks and other 
lenders have recently targeted minority borrowers for 
high-cost, predatory subprime loans that commonly 
are provided in discriminatory ways. The result is a 
system that disproportionately relegates minorities 
and minority neighborhoods to high-risk loans while 
offering similarly situated white borrowers prime 
interest rates and more favorable terms. This two- 
tiered system has substantially disadvantaged 
minority communities, where borrowers pay millions 
of dollars each year in interest and fees to high-cost 
lenders and often cannot afford the exorbitant rates 
that kick in after lower introductory “teaser” rates 
expire. Awash in such subprime mortgage loans, it is 
not surprising that these neighborhoods have been hit 
hardest by the current foreclosure crisis. As 
foreclosures erode property values and discourage 
investment, the net effect has been a grievous loss of 
wealth in minority communities.

The entrenched nature of discrimination in 
access to credit, with its pernicious intergenerational 
wealth effects, and the history of inconsistent federal 
enforcement of fair lending laws thus reinforce the



4
need for a dual enforcement scheme that operates as 
Congress intended, by allowing states to serve 
alongside the federal government in enforcing fair 
lending laws. OCC simply is not equipped to supplant 
the states’ enforcement of their fair lending laws. 
Conversely, states better understand their own laws 
and have far greater resources to address the 
problem.

AR G U M EN T

I. Congress Intended To Preserve An  
Im portant Role For The States In Fair  
Lending Enforcem ent.

A . The Federal Fair Lending Statutory  
Schem e Envisions D ual Enforcem ent 
o f Fair Lending Laws.

Provisions in the federal laws prohibiting 
discrimination in mortgage lending demonstrate that 
Congress intended to preserve an important role for 
the states in fair lending enforcement. When 
Congress passed Title VIII of the 1968 Civil Rights 
Act, known as the 1968 Fair Housing Act (“Title 
VIII”) -  the first ever federal housing 
antidiscrimination law2 -  many states and localities 
already had some form of fair housing law. See 
William J. Collins, The Political Economy o f State 
Fair Housing Laws Before 1968, 30 Soc. SCI. Hist. 15 
(2006). Recognizing this, Title VIII established state 
and local agencies as the first line of defense against

2 Pub. L. No. 90-284, 82 Stat. 81 (codified as amended at 42
U.S.C. §§ 3601-3631).



5
discriminatory housing and lending practices by 
directing the Secretary of Housing and Urban 
Development (“HUD”) to refer any complaint of a 
“discriminatory housing practice” to a state or local 
agency whose law was certified by HUD as 
substantially equivalent to Title VIII. 42 U.S.C. 
§ 3610(a)-(c) (1982 & Supp. 1987).3 The 1988
amendments to Title VIII4 continued and 
strengthened this enforcement structure. See 42 
U.S.C. § 3610(f)(1). By then, thirty-six states and 
seventy-nine localities had laws that HUD recognized 
as “substantially equivalent.” ROBERT G. SCHWEMM, 
H o u sin g  D is c r im in a t io n  § 24.5(3) (1st. ed. 1990). 
Congress took note, specifically “recogniz[ing] the 
valuable role state and local agencies play in the 
[Title VIII] enforcement process.” H.R. R e p . N o . 100- 
711, at 35 (1988).

Today, thirty-eight states and sixty-nine local 
governments have laws that HUD has recognized as 
“substantially equivalent” to Title VIII, as amended. 
HUD, Fair Housing Assistance Program Agencies, 
http://www.hud.gov/offices/fheo/partners/FHAP/agenc 
ies.cfm (last visited Mar. 3, 2009). As the district 
court recognized, the Fair Housing Act authorizes 
enforcement of these “substantially equivalent” laws 
by HUD-certified state and local agencies. See Pet.

3 The certification process is described at 42 U.S.C. 
§ 3610(f)(3)-(5); see also ROBERT G. SCHWEMM, HOUSING 
Discrimination § 24.5(2) (1st ed. 1990).

4 Fair Housing Amendments Act of 1988 (“FHAA”), Pub. L. 
No. 100-430, 102 Stat. 1619.

http://www.hud.gov/offices/fheo/partners/FHAP/agenc


App. 138a; see also 42 U.S.C. § 3610(f).5 HUD 
subsequently confirmed that the district court 
opinions in this case do not “in any way affect [] the 
authority of state and local agencies to enforce their 
own fair housing laws that HUD has certified as 
substantially equivalent to” Title VIII. Authority of 
Agencies in the Fair Housing Assistance Program to 
Investigate Allegations of Discrimination in Lending 
Complaints, 71 Fed. Reg. 33,138 (June 7, 2006) (to be 
codified at 24 C.F.R. pt. 115). The Second Circuit’s 
decision in no way undermined this interpretation.6

Here, New York did not pursue its fair lending 
investigation pursuant to a “substantially equivalent” 
law. This fact, however, does not alter the result of 
the statutory analysis. Other parts of Title VIII (and 
the FHAA) demonstrate the importance that 
Congress attributed to broader state enforcement of 
their fair housing laws -  regardless whether those 
laws have been certified by HUD as “substantially 
equivalent” to Title VIII. For example, Title VIII and 
the FHAA direct HUD to cooperate with state 
agencies that are “formulating or carrying on 
programs to prevent or eliminate discriminatory 
housing practices,” 42 U.S.C. § 3608(e)(3). Another 
provision -  distinct from the “substantially

6

5 To be certified as substantially equivalent, state fair 
housing laws must include not only administrative enforcement, 
but also judicial review and a judicial enforcement alternative 
similar to the one provided by the FHAA. 42 U.S.C. 
§ 3610(f)(3)(A)(iii)-(iv).

6 Indeed, OCC recognized this authority in its brief in the 
Second Circuit. See OCC C.A. Br. 56.



7
equivalent” certification process -  explicitly preserves 
“any law of a State or political subdivision of a State . 
. . that grants, guarantees, or protects the same 
rights that are granted by [the Act].” 42 U.S.C. 
§ 3615. Title VIII even provides financial assistance 
to state and local enforcers. Under 42 U.S.C. § 3616, 
HUD may “reimburse such agencies and their 
employees” for their enforcement efforts. Pursuant to 
that section, HUD developed the Fair Housing 
Assistance Program, which promotes greater 
enforcement of fair housing laws by providing 
financial assistance to state and local agencies. See 
24 C.F.R. § 115.300.

The second prong of the federal fair lending 
statutory scheme -  the Equal Credit Opportunity Act 
(“ECOA”)7 -  also reflects Congress’s intent to 
preserve a role for the states in fair lending 
enforcement. In that Act, Congress explicitly refused 
to “annul, alter, or affect, or exempt any [creditor] 
from complying with, the laws of any State with 
respect to credit discrimination,” except to the extent 
that the Act affirmatively preempted those laws. 15 
U.S.C. § 1691d(f). Further, although the Board of 
Governors of the Federal Reserve System is 
authorized to annul state laws “inconsistent with” 
ECOA, it may not do so if those laws “give[] greater 
protection to the applicant.” Id. And although 
Congress indicated that the ECOA’s provisions “shall 
be enforced” against national banks by OCC, 15 
U.S.C. § 1691c(a)(l)(A), the Senate Report that

7 Pub. L. No. 93-495, 88 Stat. 1521 (1974) (codified as
amended at 15 U.S.C. § 1691).



8
accompanied the bill explained both that “federally 
chartered financial institutions should be subject to 
State consumer protection laws” and that the federal 
government should “not interfere with the efforts of a 
State to protect consumers” absent “overriding 
interests to the contrary,” S. Rep. No . 93-902, at 12- 
13 (1974), as reprinted in 1974 U.S.C.C.A.N. 6119, 
6130-31.

Similarly, other federal housing laws echo the 
important role of states in fair housing and fair 
lending enforcement. The 1974 Housing and 
Community Development Act8 requires states 
receiving federal community development grants to 
“affirmatively further fair housing” and ensure that 
the grants will be administered in conformity with the 
Civil Rights Act of 1964 and Title VIII. 42 U.S.C. 
§ 5304(b)(2). This affirmative requirement would be 
rendered virtually meaningless if states were 
precluded from investigating violations of their own 
state fair housing laws against national banks.

In light of this statutory scheme, OCC does not 
argue that the National Bank Act pre-empts state 
fair lending laws themselves. Instead, it argues only 
that the Act precludes states from enforcing their fair 
lending laws outside the enforcement mechanism of a 
“substantially equivalent” law. But that position is 
untenable. OCC has provided no reason to think that 
Congress intended to pre-empt only state 
enforcement of state fair lending laws that have not

8 Pub. L. No. 93-383, 88 Stat. 633 (codified as amended at
15 U.S.C. § 5301).



9
been deemed “substantially equivalent,” much less 
that Congress intended to do so without saying 
explicitly.

In any event, the regulatory scheme envisioned 
by OCC and the Second Circuit would be particularly 
odd in light of the Second Circuit’s having vacated 
the portion of the district court injunction prohibiting 
the New York Attorney General from directly 
enforcing Title VIII pursuant to parens patriae 
standing. See Pet. App. 39a. The Second Circuit thus 
left open the anomalous possibility that a state such 
as New York would be unable to enforce its own fair 
lending and antidiscrimination laws against national 
banks, but could nonetheless enforce federal fair 
housing laws against the same entities. Moreover, 
given the federal statutory scheme’s solicitude for 
state fair lending enforcement, it would be equally 
odd to read Title VIII’s authorization of state 
enforcement of “substantially equivalent” state fair 
lending laws as a ceiling that permits states to 
enforce only state laws similar to Title VIII as 
amended by the FHAA, rather than as a floor 
designed to encourage state enforcement of fair 
lending laws beyond what federal law requires.

B. In Riegle-Neal, Congress Intended For 
OCC To Com plem ent, N ot Preclude, 
State Fair Lending Enforcem ent 
Efforts.

The Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 (“Riegle-Neal”)9

9 Pub L. No. 103-328, 108 Stat. 2338.



reinforces the conclusion that states continue to have 
power to enforce their fair lending laws against 
national banks. The Act makes clear that state fair 
lending laws -  which, of course, have traditionally 
been enforced by the states -  “shall apply” to state 
branches of national banks “to the same extent as 
such State laws apply to a branch of a bank chartered 
by that State.” 12 U.S.C. § 36(f)(1)(A) (emphasis 
added). Although Congress granted OCC concurrent 
enforcement authority, see id. § 36(f)(1)(B), it did not 
give OCC exclusive enforcement authority. 
Particularly in light of this Court’s directive that 
“Congress should make its intention ‘clear and 
manifest’ if it intends to pre-empt the historic powers 
of the States,” see Gregory v. Ashcroft, 501 U.S. 452, 
461 (1991) (quoting Rice v. Santa Fe Elevator Corp., 
331 U.S. 218, 230 (1947)), OCC has provided no basis 
for concluding that Congress, sub silentio, displaced 
the states’ historic enforcement powers. See Wyeth v. 
Levine, slip op. 18 (Mar. 9, 2009) (plurality) (“If 
Congress thought state-law suits posed an obstacle to 
its objectives, it surely would have enacted an 
express pre-emption provision at some point” but 
failed to do so).

Respondents’ argument that Congress intended 
OCC to be the exclusive enforcer of state law rests on 
a strained reading of 12 U.S.C. § 36(f)(1)(B), which 
provides that OCC “shall” enforce such laws. See, e.g., 
BIO 31. This argument is contrary to both the text of 
the statute and basic principles of statutory 
interpretation. With regard to the text, “shall” means 
only that one “has a duty to” or “is required to” carry 
out certain actions -  not that one has the exclusive 
duty or requirement to carry out such actions. See

1 0



11

B l a c k ’s La w  D ic t io n a r y  1407 (8th ed. 2004); see also 
R a n d o m  H o u se  W e b s t e r ’s C o lle g e  D ic t io n a r y  
1207 (2000) (defining “shall” as “will have to” or “is . . 
. obliged to”).

OCC’s construction of the word “shall” also 
compels an absurd result, because words appearing 
in multiple locations in a statute should be similarly 
construed. See 2A N o r m a n  J. SINGER & J.D. SHAMBIE 
S in g e r , S ta t u t e s  a n d  S t a t u t o r y  C o n s tr u c tio n  
§ 46-5, at 189-90 (7th ed. 2007). If “shall” connotes 
exclusivity in § 36(f)(1)(B), then it must do the same 
in § 36(f)(1)(A), in which Congress provided that state 
community reinvestment, consumer protection, fair 
lending, and bank branching laws “shall apply” to 
national bank branches. Because Congress obviously 
did not intend to subject state branches of national 
banks only to these enumerated state laws and 
immunize them from federal banking laws, the more 
natural reading of the “shall enforce” clause is the 
reading supported by the dictionary definition of 
“shall” -  i.e., as establishing concurrent, rather than 
exclusive, federal enforcement authority.

This construction also finds support in the 
legislative history of Riegle-Neal. Recognizing states’ 
“legitimate interest in protecting the rights of their 
consumers, businesses, and communities,” Congress 
made clear that it did not intend Riegle-Neal to 
“weaken States’ authority to protect the interest of 
their consumers, businesses, or communities.” H.R. 
REP. NO. 103-651, at 53 (1994) (Conf. Rep.), as 
reprinted in 1994 U.S.C.C.A.N. 2068, 2074 (emphasis 
added). Instead, Congress intended to “preserve!] the 
States!’] ability to apply State laws regarding 
intrastate branching, fair lending and consumer



12

protection.” 140 CONG. R e c . H6777 (daily ed. Aug. 4, 
1994) (remarks of Rep. Roukema) (emphasis added).

Accordingly, Congress clearly realized that 
states -  through enforcement of their own fair 
lending laws — play a critical role in safeguarding 
against discrimination in lending, housing, and 
access to credit.

II. The Long H istory O f Racial 
D iscrim ination D em onstrates The Need  
For A  D ual Federal And State Fair  
Lending Enforcem ent Structure.

The history of lending discrimination is long, 
well-documented, and -  unfortunately — continues in 
both the private and public sectors. While federal 
antidiscrimination laws were passed to address this 
history, they only partially remedied such inequities. 
Their effects were curtailed by federal regulators’ 
reluctance to enforce these laws against private 
banks. The legacy of this pervasive discrimination 
and reluctant, uneven remediation requires all 
resources -  federal and state -  that can be mustered 
to address it.

A. The Public And Private Sectors Each  
M utually Reinforced The O ther’s 
D iscrim inatory Lending Practices In  
W ays That Have Had Intergenerational 
Effects.

During the early years of the twentieth century, 
private lenders and realtors actively discriminated 
against minorities to keep neighborhoods racially 
segregated. KENNETH T. JACKSON, CRABGRASS 
F r o n t ie r  198 (1985). Indeed, racial discrimination



13
was so widespread that a real-estate appraisal 
manual, regarded as the “bible of appraising,” openly 
advised appraisers “to determine whether there were 
‘undesirable racial elements’ in an area.” Calvin 
Bradford, Financing Home Ownership: The Federal 
Role in Neighborhood Decline, 14 U r b . A f f . R e v . 313, 
323 (1979).10

The Great Depression created widespread 
demand for government action in the housing and 
lending sectors. JACKSON, supra, at 193. In response, 
Congress passed, among other acts, the Home 
Owners Loan Act of 1933,11 which created the Home 
Owners Loan Corporation (“HOLC”) to provide 
mortgage assistance.12 The HOLC “institutionalized 
the practice of ‘redlining,’” DOUGLAS S. MASSEY & 
N a n c y  A. D e n t o n , A m e r ic a n  A p a r t h e id  51 (1993), a 
process by which lending institutions -  either 
literally or figuratively -  “block [ed] off certain areas

10 Such practices were part and parcel of widespread and 
overt discriminatory housing practices during the first decades 
of the twentieth century. These included local ordinances 
prohibiting African-Americans from living on blocks where the 
majority of houses were occupied by white persons, see 
Buchanan v. Warley, 245 U.S. 60 (1917); racially restrictive 
covenants that continued even after the Supreme Court held 
them unenforceable in Shelley v. Kraemer, 334 U.S. 1 (1948), see 
Duane Lockard, Toward Equal Opportunity 120-21 (1968); 
and the posting of signs by small towns warning African 
Americans to leave before sunset or not enter at all, see JAMES 
Loewen, Sundown Towns 4-5 (2005).

11 Pub. L. No. 73-43, 48 Stat. 128 (1933) (codified as 
amended at 12 U.S.C. §§ 1461-1468).

12 § 4, 48 Stat. at 129-32 (repealed by Act of June 30, 1953, 
ch. 170, § 21, 67 Stat. 126).



14
of cities within ‘red lines,”’ refusing “to loan . . . 
within them,” N a t ’l  C o m m ’N ON URBAN PROBLEMS, 
B u il d in g  th e  A m e r ic a n  C it y , H.R. D o c . N o . 91-34, 
at 101 (1968). Although private lenders already used 
similar tactics, the HOLC implemented them on an 
“unprecedented scale,” JACKSON, supra, at 199, 
thereby “len[ding] the power, prestige, and support of 
the federal government to the systematic practice of 
racial discrimination in housing,” MASSEY & DENTON, 
supra, at 52.

HOLC’s redlining practices were expanded by 
the Federal Housing Administration (“FHA”),13 
another New Deal institution created to stimulate 
the housing market, JACKSON, supra, at 203-04. The 
significance of the FHA’s role in redlining during the 
mid-twentieth century cannot be overemphasized: 
“No agency of the United States government has had 
a more pervasive and powerful impact on the 
American people . . . than the [FHA].” Id. at 203.

The FHA played two important roles. First, 
unlike the HOLC, which directly issued loans and 
refinanced mortgages, the FHA induced private 
lenders to issue mortgages by providing an essential 
ingredient: mortgage insurance. JACKSON, supra, at 
196, 204. The FHA “engaged in ‘both official and 
informal [flederal encouragement of racial 
segregation’ by . . . refusing to provide insurance in 
integrated neighborhoods, promoting the use of 
racially restrictive covenants, and red [] lining

13 See National Housing Act of 1934, Pub. L. No. 73-479, 48 
Stat. 1246 (codified as amended at 12 U.S.C. §§ 1701-1750).



15
practices.” Thompson v. U.S. Dep’t ofHous. & Urban 
Dev., 348 F. Supp. 2d 398, 466 (D. Md. 2005) (quoting 
Equal Educational Opportunity, Part 5 — De Facto 
Segregation and Housing Discrimination: Hearings 
Before the S. Select Comm, on Equal Educational 
Opportunity, 91st Cong. 2755 (1970) (statement of 
George Romney, Secretary, HUD)); see also D a n  
IMMERGLUCK, CREDIT TO THE COMMUNITY 94 (2004). 
In some cases, the presence of even a single non­
white family was enough for the FHA to refuse to 
insure any loans to an entire block. JACKSON, supra, 
at 208-09.

Just as importantly, the FHA acted “as a 
standard setting agency,” establishing and 
disseminating appraisal, insurance, and loan 
practices for use by the private sector. IMMERGLUCK, 
supra, at 94. The FHA’s embrace of redlining became 
the standard for private loans: where the FHA 
refused to insure, private banks refused to lend. 
Thus, by the 1960s, one-half of Detroit and one-third 
of Chicago were simply redlined out of eligibility for 
FHA mortgage insurance. Michael H. Schill & Susan 
M. Wachter, The Spatial Bias o f Federal Housing 
Law and Policy: Concentrated Poverty in Urban 
America, 143 U. Pa . L. Rev. 1285, 1311 (1995).14

14 Other cities faced similar discrimination and segregation 
problems, leading one court to find that “racial segregation and 
racial discrimination in public and private housing” created “a 
housing emergency in Boston.” NAACP v. Harris, 567 F. Supp. 
637, 640-41 (D. Mass. 1983); see also NAACP v. Sec’y of HUD, 
817 F.2d 149 (1st Cir. 1987) (Breyer, then-Judge) (affirming 
findings of fact in Harris).



16
This blatant lending discrimination had 

significant effects on minority borrowers, in the 
housing sector and beyond. Redlining created a two- 
tiered lending system that would set the stage for 
today’s subprime crisis: although white borrowers 
could obtain traditional loans, minority borrowers 
were forced to resort to less attractive credit 
instruments, often referred to as the “underworld” of 
finance. Peter P. Swire, The Persistent Problem of 
Lending Discrimination: A Law and Economics 
Analysis, 73 T e x . L. R e v . 787, 801 & n.69 (1995).

This two-tiered system was also reflected in the 
small business loan industry, where minorities 
experienced significant difficulty in obtaining both 
public and private loans: in the 1940s, only 3.3% of 
African-American-owned businesses could secure any 
credit from banks. IMMERGLUCK, supra, at 60. In 
response, minorities set up their own banks. Id. at 
59. However, racial discrimination limited the banks’ 
ability to obtain and loan capital, thereby “stunt[ing] 
their ability to serve larger, creditworthy firms” and 
reducing the ability of minority-owned businesses to 
expand. Id. This pattern of racial discrimination in 
small business loans continued through the next half- 
century. See Adarand Constructors, Inc. v. Slater, 228 
F.3d 1147, 1169-70 (10th Cir. 2000) (describing the 
“striking” evidence of “race-based denial of access to 
capital” to minority enterprises over time, based on 
numerous Congressional hearings and reports), cert, 
dismissed sub nom. Adarand Constructors u. Mineta, 
534 U.S. 103 (2001) (per curiam).



17
B. Federal Rem edial Legislation Has 

Failed To Solve Racial Lending  
D isparities.

Decades of racial discrimination created a “spiral 
of decline” in inner cities, as a lack of capital 
depressed property values and drove off businesses. 
M a s s e y  & D e n t o n , supra, at 55. This spiral 
culminated in the race riots of the 1960s, with 
hundreds of lives lost and millions of dollars in 
property damage sustained. Id. at 58-59. The 
commission convened to investigate the cause of the 
riots concluded that redlining was one of the causes 
of the racial tension and recommended that Congress 
enact federal fair housing laws. See REPORT OF THE 
N a t io n a l  A d v is o r y  C o m m is s io n  o n  C iv il  D iso r d e r s  
257-63 (1968) (“Th e  K e r n e r  R e p o r t ” ).

Adopting this recommendation, Congress 
enacted Title VIII, which — among other things — 
prohibits racial discrimination in the sale, purchase, 
brokerage, or appraisal of property. 42 U.S.C. 
§§ 3604, 3605. In the decade that followed, Congress 
passed a variety of fair lending laws to complement 
Title VIII, including the ECOA, the HMDA,15 and the 
Community Reinvestment Act (“CRA”).16

Despite Congress’s good intentions, these fair 
housing and lending laws have failed to remedy the 
decades-old effects of lending discrimination, in no

15 Pub. L. No. 94-200, tit. Ill, 89 Stat. 1125 (1975) (codified 
as amended at 12 U.S.C. §§ 2801-2810).

16 Pub. L. No. 95-128, tit. VIII, 91 Stat. 1111, 1147-48 
(1977) (codified as amended at 12 U.S.C. §§ 2901-2905).



18
small part due to their inconsistent enforcement. See 
N a t ’l  C o m m ’n  o n  F a ir  H o u s in g  a n d  E q u a l  
O p p o r t u n it y , T h e  F u tu r e  o f  Fa ir  H o u s in g  10, 13- 
19, 22-25 (2008) [hereinafter FAIR HOUSING].

First, although Title VIII authorizes individuals 
who believe that they have been victims of 
discrimination to file complaints, 42 U.S.C. 
§ 3610(a)( 1)(A)(i), limited access to information 
increases the obstacles to private enforcement in the 
lending sector. “Individual loan applicants typically 
are not sophisticated enough to realize when they 
have been prescreened illegally or denied a mortgage 
loan on a prohibited basis.” Stephen M. Dane, 
Eliminating the Labyrinth: A  Proposal to Simplify 
Federal Mortgage Lending Discrimination Laws, 26 
U. M ic h . J.L. Ref. 527, 544 (1993) (footnote omitted). 
“The history of discrimination and redlining [that] 
has made many minorities ‘accustomed’ to rejection 
and less likely to question or contest it” has only 
exacerbated these information asymmetries. 
IMMERGLUCK, supra, at 136.17

As a result of the obstacles to individual suits, 
primary responsibility for enforcement of the federal

17 In one recent study, over 80% of those who believed they 
had experienced discrimination in the housing market did 
nothing about it. MARTIN D. ABRAVANEL & Mary K. 
Cunningham, How Much Do We Know? Public Awareness of 
the Nation’s Fair Housing Laws 27 tbl. 12 (2002). Similar 
information asymmetries hamper individual enforcement of the 
rights protected by ECOA. See Michael S. Barr, Credit Where It 
Counts: The Community Reinvestment Act and Its Critics, 80 
N.Y.U. L. REV. 513, 626-27 (2005).



fair lending and fair housing laws has fallen to HUD 
and the Department of Justice (“DOJ”), whose 
enforcement of Title VIII and the ECOA has been, at 
best, inconsistent. Under the original version of Title 
VIII, “HUD ha[d] no power of enforcement.” 
Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 210 
(1972). It was instead limited to “informal methods of 
conference, conciliation and persuasion.” 42 U.S.C. 
§ 3610(a) (1982 & Supp. 1987).18 Even after the 1988 
FHAA created an enforcement mechanism for HUD, 
fair lending enforcement has been limited: HUD filed 
only 31 discrimination charges in 2007. Fair 
Housing, supra, at 13-14.

A similar story can be told about the DOJ. Under 
the amended Title VIII and the ECOA, the DOJ’s 
independent enforcement authority is limited 
primarily to instances of a “pattern or practice” of 
discrimination or discrimination of “general public 
importance.” 42 U.S.C. § 3614. There was very little 
fair lending enforcement by the DOJ until 1992. 
While there was a spurt of fair lending enforcement 
until 2000, it subsequently dissipated.19

19

18 As described above, however, Title VIII -  both as 
originally enacted and in its modern incarnation -  carves out a 
significant role for the states. See 42 U.S.C. §§ 3610(f), 3615; 
Pub. L. No. 90-284, §§ 810(c)-(d), 82 Stat. 81, 86 (1968).

19 According to the list of cases on the DOJ website, see 
U.S. Dep’t of Justice, Fair Housing Cases, 
http://www.usdoj.gOv/crt/housing/fairhousing/caseslist.htm#l 
(last visited Mar. 4, 2009), fifteen fair lending cases challenging 
discrimination in real-estate-related lending were brought from 
1992-2000, many of which challenged discriminatory predatory

http://www.usdoj.gOv/crt/housing/fairhousing/caseslist.htm%23l


20
OCC’s fair lending enforcement record pursuant 

to the ECOA, 15 U.S.C. § 1691c(a)(l)(A), is even 
spottier. During the fifteen-year period from 1990 to 
2004, OCC brought only four formal enforcement 
actions under the ECOA and/or its implementing 
regulation.20 And although OCC is required by the 
ECOA to “refer . . . matterfs] to the Attorney General 
with a recommendation that an appropriate civil 
action be instituted” whenever it “has reason to 
believe that 1 or more creditors has engaged in a 
pattern or practice of discouraging or denying 
applications for credit in violation o f ’ the ECOA, 15 
U.S.C. § 1691e(g), between 1999 and 2005 OCC made 
only six fair lending referrals to DOJ, only one of 
which involved discrimination on the basis of race or 
national origin.21

activities. But since 2001, DOJ has brought only five fair 
lending cases dealing with residential lending. None has 
concerned predatory lending practices despite extensive 
research demonstrating the discriminatory patterns so 
prevalent in the subprime market. See FAIR HOUSING, supra, at 
23.

20 This information is contained in annual reports that the 
Federal Reserve Board (“FRB”) and U.S. Attorney General 
provide to Congress. See 15 U.S.C. §§ 1613, 1691f; see also FRB, 
ANNUAL Report 2004, at 69-70. The relevant pages from the 
FRB Annual Reports by year are as follows: for 2003, 67-68; 
2002, 75-76; 2001, 134-35; 2000, 105-06; 1999, 107-08; 1998, 
221-22; 1997, 192-93; 1996, 200; 1995, 212; 1994, 224-25; 1993, 
210-11; 1992, 196-97; 1991, 181-82; 1990, 168. See FRB, Reports 
to Congress, http://www.federalreserve.gov/boarddocs/ 
rptcongress/ (last visited March 4, 2009).

21 See, e.g., The Attorney General’s 2005 ANNUAL 
Report to Congress Pursuant to the Equal Credit

http://www.federalreserve.gov/boarddocs/


21

Furthermore, although Title VIII requires 
federal banking regulators, including OCC, to 
“administer their programs and activities relating to 
housing and urban development . . .  in a manner 
affirmatively to further the purposes” of the Act, 42 
U.S.C. § 3608(d), there too implementation and 
enforcement efforts have been inconsistent and 
sometimes reluctant. This reluctance dates back to 
the post-Depression era, when banking regulators 
adopted a policy of “benign neglect” towards 
discrimination by private lenders. Bradford, supra, at 
324. Once Title VIII was enacted, federal bank 
regulators were slow to implement it: it was eight 
years before any regulator issued a final regulation 
under the Act, IMMERGLUCK, supra, at 137, and it 
took a lawsuit to force regulators — including OCC — 
to promulgate regulations to enforce and monitor 
compliance with federal anti-discrimination laws, 
including Title VIII. J o h n  G o e r in g  & R o n  W ie n k , 
M o r tg a g e  L e n d in g , R a c ia l  D is c r im in a t io n , a n d  
F e d e r a l  P o l ic y  402 (1996). Indeed, it was this 
lawsuit that prompted OCC to create its Consumer 
Affairs Division. Id.

Enforcement of the other federal fair lending 
laws has been similarly inconsistent. For example, 
the CRA requires federal banking regulators, 
including OCC, 12 U.S.C. § 2902(1)(A), to “assess a 
[regulated] institution’s record of meeting the credit

Opportunity Act Amendments of 1976, at 1-4. The remaining 
reports are at http://www.usdoj.gov/crt/housing/ 
housing_special.php.

http://www.usdoj.gov/crt/housing/


22
needs of its entire community, including low- and 
moderate-income neighborhoods,” 12 U.S.C. 
§ 2903(a)(1). However, these assessments of housing 
and small business loans have been conducted in 
such a manner that, “ [tjhroughout the 1980s, [they] 
were almost impossible to fail”: one study found that 
only 2.4% of 26,000 CRA examinations conducted 
between 1985 and 1988 resulted in a poor evaluation. 
Keith N. Hylton & Vincent D. Rougeau, Lending 
Discrimination: Economic Theory, Econometric
Evidence, and the Community Reinvestment Act, 85 
G e o . L.J. 237, 243 n.33 (1996) (citation omitted). In 
1997, OCC made the CRA assessments even less 
burdensome, counseling its bank examiners to look 
beyond the banks’ self-evaluations of their lending 
patterns “only where questions are raised.” OCC, 
C o m m u n it y  R e in v e s t m e n t  A ct  E x a m in a t io n  
P r o c e d u r e s  5 (1997).
III. Lending D iscrim ination Persists And

Plays An Im portant Role In The Ongoing
Foreclosure Crisis And The Elim ination
O f W ealth Accum ulated By M inorities.

Although well-intentioned, federal remedial 
legislation has failed to eliminate racial 
discrimination in the credit market. Today, lenders 
continue to discriminate against minorities, denying 
them access to credit through redlining and other 
techniques. Exacerbating racial inequities, the more 
recent introduction of subprime lending has led to 
exploitation of the credit vacuum in the form of 
targeting minorities for high-cost loans that they 
cannot afford. See William C. Apgar & Allegra 
Calder, The Dual Mortgage Market: The Persistence 
o f Discrimination in Mortgage Lending 1 (Joint Ctr.



for Hous. Studies, Harvard Univ., Working Paper No. 
W05-11, 2004). The infusion of risky credit in 
minority communities has recreated a two-tiered 
system: white borrowers have access to prime-rate 
loans from mainstream lenders, while minorities are 
relegated to the subprime market. See id. at 1, 10. 
And although targeted subprime lending is a distinct 
practice from redlining, its effects are much the 
same: it undermines minority communities, stripping 
borrowers of equity and siphoning capital out of 
neighborhoods struggling to build wealth. See 
G r e g o r y  D. S q u ir e s  & C h a r l e s  E. K u b r in , 
P r iv il e g e d  P l a c e s : Ra c e , R e s id e n c e , a n d  th e  
St r u c t u r e  o f  O p p o r t u n it y  56 (2006). In the home 
lending industry, borrowers unable to repay costly 
mortgages lose their homes, leaving minority 
communities to again suffer the consequences of 
rapid disinvestment.

A. Lenders Continue To D eny M inorities  
Access To Credit Through R edlining  
And Disparate Treatm ent O f M inority  
Applicants.

Notwithstanding remedial legislation, 
redlining remains a persistent problem today. The 
handful of cases brought by the DOJ in recent years 
demonstrates the extent to which the practice 
continues. For example, as recently as 2006, the DOJ 
filed a complaint alleging that Centier Bank refused 
to lend to would-be borrowers in minority 
neighborhoods. Compl.  ̂ 10, United States u. Centier 
Bank, No. 2:06-CV-344 (N.D. Ind. Oct. 13, 2006) 
(settled by consent order). Two years earlier, the DOJ 
filed a similar suit against First American Bank, 
which had “acted to meet the residential, consumer

23



24
and business credit needs of predominantly white 
[areas but] avoided serving the lending and credit 
needs of minority [areas].” See Compl. <][ 12, United 
States v. First Am. Bank, No. l:04-CV-4585 (N.D. 111. 
July 13, 2004) (settled by consent order). That same 
year, DOJ settled a case against Old Kent Bank, 
which allegedly issued only 2.2% of all its loans in the 
Detroit metropolitan area to applicants in Detroit’s 
inner city. See United States v. Old Kent Fin. Corp., 
No. 04-71879, 2004 WL 1157779, at *3 (E.D. Mich. 
May 19, 2004) (entering settlement agreement). 
Borrowers have filed similar suits, including one 
accusing Bank of America of “scheming] to direct its 
. . . mortgage transactions . . .  in neighborhoods 
primarily comprised of Caucasians,” Johnson v. 
Equicredit Corp., No. 1C5197, 2002 WL 448991, at *4 
(N.D. 111. Mar. 22, 2002) (settled out of court).

A key component of redlining is the banks’ 
refusal to establish branches in minority 
neighborhoods. See David N. Figlio, Bank 
Consolidations and Minority Neighborhoods, 45 J. 
U r b . E c o n . 474 (1999). In a particularly striking 
example, as of 2000, one lender had established fifty- 
three branches in the greater Detroit area without 
locating a single one in the largely African-American 
inner city. Old Kent Fin. Corp., 2004 WL 1157779, at 
*2. Similarly, of Centier Bank’s twenty-seven 
branches around Gary, Indiana, none were located in 
minority neighborhoods as of 2001. See Compl. f  13, 
Centier Bank, No. 2:06-CV-344. The dearth of bank 
branches in minority communities significantly 
undercuts access to credit, because individuals in 
those communities are denied services like credit 
counseling and bank-funded credit lines. Gregory D. 
Squires, The New Redlining, in W h y  THE POOR PAY



25
MORE 1, 8 (Gregory D. Squires ed. 2004). The 
problem is particularly acute for small businesses, 
which require in-person visits from loan officers to 
secure credit. See IMMERGLUCK, supra, at 76. Because 
loan officers often make loans only within a small 
radius of their branch and may also be reluctant to 
enter minority neighborhoods, minority-owned firms 
lack opportunities available to businesses in white 
areas rich in banking services. Id. at 67, 76.

When minority borrowers do seek loans from 
mainstream lenders, the lenders frequently subject 
them to discriminatory treatment. One government 
study that compared 250 test pairs, each including 
one white and one African-American or Latino 
borrower, concluded that despite having equal or 
better qualifications, minorities were repeatedly 
offered lower loan amounts, fewer loan products, and 
less credit counseling than white borrowers. HUD, 
All Other Things Being Equal: A Paired Testing 
Study of Mortgage Lending Institutions 39 
(2002). Similar studies revealed that lenders treated 
minorities unequally in nearly half of their 
interactions. See Rooting Out Discrimination in 
Mortgage Lending: Using HMDA as a Tool for Fair 
Lending Enforcement: Hearing Before the Subcomm. 
on Oversight and Investigations o f the H. Financial 
Serv. Comm., 110th Cong. 268 (2007) (statement of 
John Taylor, President and CEO, National 
Community Reinvestment Coalition). Given these 
patterns, it is not surprising that lenders deny 
minorities loans at significantly higher rates than 
white applicants. Christian E. Weller, Ctr. for Am . 
Progress, Access Denied: Low Income and 
Minority Families Face More Credit Constraints 
and Higher Borrowing Costs 2 (2007).



26

B. The Present Credit Crisis R eflects A  
N ew  D iscrim inatory Pattern O f 
Targeting M inorities For H igh-Cost, 
Subprim e Loans.

Decades of discrimination have left many 
minorities without adequate credit and unfamiliar 
with the lending process. John P. Reiman, 
Foreclosures, Integration, and the Future o f the Fair 
Housing Act, 41 Ind. L. Rev. 629, 637 (2008). Taking 
advantage of these conditions, unscrupulous lenders 
peddling high-cost loans have increasingly focused on 
minority communities. See SQUIRES & K u b r in , supra, 
at 56. This practice has been dubbed “reverse 
redlining” for both the deliberateness with which 
minorities are targeted and lenders’ efforts to take 
advantage of inexperienced borrowers by flooding 
them with costly loans rather than denying them 
credit. See id.; Compl. 20, Mayor o f Baltimore v. Wells 
Fargo Bank, No. l:08-CV-00062 (D. Md. Jan. 8, 2008) 
(alleging that the bank “ [t]arget[ed] Baltimore’s 
African American [neighborhoods for [ijmproper and 
[irresponsible [1]ending [practices”).

The explosion of “fringe” lenders in minority 
neighborhoods is a prime example of reverse 
redlining. Check cashers, payday lenders, and tax 
refund advance services flourish in communities 
where banks refuse to lend. See Squires, supra, at 7; 
N e ig h b o r h o o d  E c o n . D e v . A d v o c a c y  P r o j e c t , 
R a p id  R ip -O f f s : Ta x  R e f u n d  A n t ic ip a t io n  L e n d in g  
in  N e w  Y o r k  C it y  2 (2006) [hereinafter Ra p id  R ip - 
O f f s ]. Recent studies found that African-American 
neighborhoods have an average of three times more 
payday lenders than white neighborhoods, C t r . FOR



R e sp o n s ib l e  L e n d in g , R a c e  M a t t e r s : T he

C o n c e n t r a t io n  o f  Pa y d a y  L e n d e r s  in  A f r ic a n  
A m e r ic a n  N e ig h b o r h o o d s  in  N o r th  Ca r o l in a  2 
(2005) [hereinafter PAYDAY LENDERS], and refund 
advance services cluster in areas where minorities 
comprise over ninety-five percent of the population, 
Ra p id  R ip -O f f s , supra, at 4. Although these lenders 
purport to relieve financial woes by providing access 
to quick cash, they in fact trap borrowers in debt, as 
few can repay loans and cover the exorbitant fees in 
the short time allotted. PAYDAY LENDERS, supra, at 3- 
4. Use of fringe lending services can be extremely 
costly: borrowers pay, on average, $1000 more 
annually in fees to check cashers and payday lenders 
than they would to banks. SQUIRES & K u b r in , supra, 
at 15.

Lenders also target minorities for subprime credit 
cards. See e.g., Compl. U 11, United States v. Fid. Fed. 
Bank, No. l:02-cv-03906-NG-MDG (E.D.N.Y. July 8, 
2002) (alleging that the lender marketed high- 
interest credit cards to African Americans and 
Latinos through church groups and in-home sales) 
(settled out of court). Aggressive marketing strategies 
and abusive terms have led to rising debts among 
minorities. Ja v ie r  S il v a  & R e b e c c a  E p s t e in , C o stl y  
C r e d it : A f r ic a n  A m e r ic a n s  a n d  La t in o s  in  D e b t  6-7 
(2005).

C. As A  Result O f Reverse R edlining In 
The H om e Lending Industry, 
M inorities Account For A  
D isproportionate Share O f Subprim e  
M ortgages.

Particularly pervasive in the home mortgage 
industry is reverse redlining, which targets minority

27



borrowers for high-cost, subprime loans. In perhaps 
the most pernicious practice, profit-seeking mortgage 
lenders often attempt to steer minority borrowers 
towards risky subprime loans even when they would 
qualify for prime loans. Fair HOUSING, supra, at 33. 
Indeed, one study of subprime loans made between 
2000 and 2006 calculated that over half of subprime 
borrowers — among whom minorities are over­
represented relative to their share of the population -  
could have qualified for prime-rate mortgages. Id. 
The differences in the overall costs to the borrower 
can be substantial. On average, a subprime loan can 
cost the borrower nearly $300 more per month, and 
as much as $100,000 over the life of the loan, see 
Nat’l Cmty. Reinvestment Coal., Income Is No 
Shield Against Racial Differences in Lending II, 
at 8 (2008) — money that could otherwise be used 
elsewhere, including for education or reinvestment in 
the community.

Reverse redlining has had predictable effects: 
although the majority of subprime loans go to non- 
Latino white borrowers, approximately half of all 
mortgage loans made to African Americans and 
Latinos are subprime, compared with less than 
twenty percent of loans made to white borrowers. 
Fair Housing, supra, at 33 (analyzing 2006 HMDA 
data). In New York, where the Attorney General’s 
investigation into discriminatory lending sparked 
this lawsuit, the ten neighborhoods with the highest 
levels of subprime lending are predominantly African 
American or Latino, while the ten neighborhoods 
with the lowest levels are predominantly white. 
Manny Fernandez, Study Finds Disparities in 
Mortgages by Race, N.Y. Times, Oct. 15, 2007, at A20.

28



29
Racial disparities persist even when income and 

credit history are taken into account. IMMERGLUCK, 
supra, at 118. Indeed, the disparities increase as 
salaries rise, with upper-income minorities receiving 
twice as many high-cost mortgage loans as upper- 
income whites. See Vikas Bajaj & Ron Nixon, For 
Minorities, Signs o f Trouble in Foreclosures, N.Y. 
TIMES, Feb. 22, 2006, at A l.

National banks bear a significant share of the 
responsibility for the disproportionate number of 
subprime loans made to minorities. See CAL. 
R e in v e s t m e n t  C o a l ., W h o  R e a l l y  G ets  H ig h e r - 
C o st  H om e  L o a n s? 18 (2005). One study analyzing 
California’s home loan market found that African 
Americans bore the heaviest burden: all told, they 
were over four times more likely than whites to 
receive high-cost home-refinance loans from national 
banks. Id.

D. D iscrim inatory Lending In The 
M ortgage Industry Frustrates Upward  
M obility A nd Elim inates W ealth  
Accum ulated By M inorities.

The effects of reverse redlining in the mortgage 
industry are both significant and wide-ranging. One 
unfortunate by-product of targeting minorities for 
high-cost home loans is that minorities are often 
unable to move into neighborhoods where they would 
enjoy better schools and more plentiful employment 
opportunities. See SQUIRES & KUBRIN, supra, at 23, 
29. The inability to access such areas, which have 
often been historically white, thwarts minorities’ 
advancement and perpetuates long-standing wealth 
disparities. See id. at 23.



The concentration of subprime mortgages among 
minorities also strips existing wealth. Because of 
exorbitant fees, initial higher interest rates, and 
resets that increase these rates, subprime loans are 
ten to twenty times more likely to end up in 
foreclosure than prime loans. See Dan Immergluck, 
From the Subprime to the Exotic: Excessive Mortgage 
Market Risk and Foreclosures, 74 J. A m . P l a n . A ss ’N 
59, 59-60, 66 (2008). Not surprisingly, minority 
neighborhoods have already been hardest hit by the 
foreclosure crisis, which is likely to worsen before it 
improves, see CTR. FOR RESPONSIBLE LENDING,
U p d a t e d  P r o je c t io n s  o f  Su b p r im e  F o r e c l o s u r e s  
in  th e  U n ite d  S ta t e s  a n d  T h e ir  Im p a c t  o n  H om e  
V a l u e s  a n d  C o m m u n it ie s  1 (2008) (predicting that 
2.2 million subprime mortgages will enter foreclosure 
by the end of 2009). In Chicago, where foreclosures 
tripled between 1993 and 2005, minority 
neighborhoods account for sixty-five percent of 
foreclosure filings. Bajaj & Nixon, supra (noting 
similar trends in Atlanta and Philadelphia). These 
areas averaged 41.6 foreclosures per 1000
mortgageable properties in 2007, over double the 
regional average. WOODSTOCK In s t ., FORECLOSURES 
in  th e  C h ic a g o  R e g io n  C o n tin u e  to  G r o w  a t  a n  
A l a r m in g  R a te  4 (2008).

The disproportionate impact of the foreclosure 
crisis has stripped minority communities of the hard- 
won gains in wealth that resulted from recent 
increases in legal, educational, and employment 
opportunities. See Melvin Oliver, Univ. of Cal. -  
Santa Barbara, Testimony at the National
Commission on Fair Housing and Equal Opportunity 
1 (Sept. 9, 2008). Historically, it is one of the greatest

30



losses of wealth in minority communities in 
generations. Id. at 5.

Although massive in scale, this pattern of 
losses is not unfamiliar, but is instead reminiscent of 
the “spiral of decline” sparked by redlining in the 
1960s. When foreclosure rates are high, home values 
plummet, both because foreclosed homes sell at 
below-market prices and because the supply of 
available homes outpaces demand. Ka i -y a n  Le e , F e d . 
R e se r v e  B a n k  o f  B o s t o n , F o r e c l o s u r e ’s P r ic e - 
D e p r e ss in g  S p il l o v e r  E ff e c t s  O n  L o c a l  
P r o p e r t ie s  1 (2008). The rising crime rates that 
accompany foreclosures then exacerbate the decline 
in home values. See Dan Immergluck & Geoff Smith, 
The Impact o f Single-Family Mortgage Foreclosures 
on Neighborhood Crime, 21 HOUS. STUD. 851 (2006). 
The downward spiral continues as the neighborhood’s 
remaining distressed borrowers lack the equity to 
refinance their own subprime loans because of the 
drop in home values, driving them into foreclosure. 
E ll e n  S c h l o e m e r  e t  a l ., C t r . f o r  R e spo n sib l e  
Le n d in g , L o s in g  G r o u n d : F o r e c l o s u r e s  in  th e  
Su b pr im e  M a r k e t  a n d  T h e ir  C o st  to  H o m e o w n e r s  
3-4 (2006).

The effects of the foreclosure crisis extend 
beyond the individual to municipalities and residents 
in the broader community. Each foreclosure increases 
the burden on local public agencies, requiring them to 
spend more money on police patrols, building 
inspections, demolition contracts, and legal and 
administrative procedures. WILLIAM C. A p g a r  & 
M a r k  D u d a , H o m e o w n e r s h ip  P r e s . F o u n d ., 
C o l l a t e r a l  D a m a g e : T h e  M u n ic ip a l  Im p a c t  of 
T o d a y ’s M o r tg a g e  F o r e c lo su r e  B o o m  4, 6 (2005). 
Distressed borrowers are also often unable to pay

31



32
property taxes, reducing the revenue flowing to local 
governments, id. at 7, and leading to tax increases 
and cuts in social services.

IV. In Light O f OCC’s Lim ited Enforcem ent 
Capacity, The States Are Especially W ell- 
Suited To Serve A s D ual Enforcers O f  
Their Own Fair Lending Laws.

Congress’s desire to preserve an important role 
for the states in the enforcement of fair lending laws 
reflects a common-sense approach to a severe and 
widespread problem. The overlapping state and 
federal regulatory schemes that Congress envisioned 
take account of OCC’s limited capacity to enforce 
state fair lending laws as well as the suitability of, 
and incentives for, state enforcement. Such a dual 
enforcement regime will likely result in increased 
enforcement of fair lending laws and thereby better 
protect minority communities.

A. OCC Is N ot Equipped To A ct As The  
Exclusive Enforcer O f State Fair  
Lending Laws

Not only is OCC’s actual record of federal fair 
lending enforcement spotty, as explained supra at 20- 
22, but OCC’s capacity to serve as the exclusive 
enforcer of state fair lending laws, in addition to 
federal laws, is quite limited. To successfully police 
the lending practices of national banks’ state 
branches, OCC would have to respond to complaints 
from, and conduct independent investigations in, all 
fifty states. But it lacks the resources, time, and 
manpower to do so. In 2005, for example, only one 
percent of OCC’s budget went to its Consumer



33
Assistance Group, the fifty-person division charged 
with handling all consumer complaints. See Credit 
Card Practices: Current Consumer and Regulatory 
Issues: Hearing Before the Subcomm. on Financial 
Institutions and Consumer Credit o f the H. Comm, on 
Financial Services, 110th Cong. 80 (2007) (statement 
of Arthur E. Wilmarth, Jr., Professor of Law, George 
Washington University Law School). Put another 
way, if O C C  were indeed the exclusive enforcer of 
state fair lending laws, it alone would be responsible 
for “investigating] all such complaints for 2150 
national banks in the 50 States from a single 
customer assistance center which only takes calls 
from 9 am to 4 pm, on four days each week, excluding 
Federal holidays.” H. COMM. ON F in . S e r v s ., 108th  
C o n g ., V ie w s  a n d  E stim a t e s  of  th e  C o m m itt e e  on  
F in a n c ia l  S e r v ic e s  o n  M a t t e r s  to  B e S e t  F o r th  in  
th e  C o n c u r r e n t  R e s o l u t io n  o n  th e  B u d g e t  fo r  
F is c a l  Y e a r  2005, at 16 [hereinafter H ou se  V iew s  
a n d  E s t im a t e s ],

The problems created by OCC’s limited 
enforcement capacity are compounded by the 
agency’s financial incentives to refrain from 
investigating claims of lending discrimination. OCC’s 
budget depends on assessments against nationally 
chartered banks, OCC, A n n u a l  R e p o r t , F isc a l  Y e a r  
2005, at 7 (2005), which can abandon their national 
charters at any time. OCC thus has a vested interest 
in reducing the regulatory burden on national banks 
to make the national charter as attractive as possible 
and thereby preserve its own budget. Indeed, when 
asked about OCC’s power to preclude enforcement of 
state fair lending laws, former Comptroller John 
Dugan responded that “ [preclusion] is one of the



advantages of a national charter, and I’m not the 
least bit ashamed to promote it.” Paul Beckett & Jess 
Bravin, Friendly Watchdog: Federal Regulator Often 
Helps Banks Fighting Consumers—Dependent on 
Lenders’ Fees, OCC Takes Their Side Against Local, 
State Laws—Defending Uniform Rules, W alt, St . J., 
Jan. 28, 2002, at A l.

In the five years since OCC appointed itself the 
exclusive enforcer of state fair lending laws, its 
limited enforcement capacity and its incentives to 
refrain from regulating have predictably prevented it 
from adequately policing the lending practices of 
national banks. For example, as discussed above, see 
supra at 20, OCC has an extremely poor track record 
in referring matters to DOJ pursuant to 15 U.S.C. 
§ 1691e(g). OCC’s last reported OCC referral based 
on race discrimination was in 1999, see Compl. f  1, 
United States v. Deposit Guar. Nat’l Bank, No. 3:99- 
CV-00670-STL (S.D. Miss. Sept. 29, 1999).

OCC’s failure to make referrals and enforce 
state laws cannot be attributed to a lack of 
discriminatory lending practices by national banks. 
Indeed, studies have confirmed that national b a nks 
frequently offer loans to minorities on terms that are 
less favorable than those offered to white borrowers. 
See Ca l . R e in v e s t m e n t  C o a l ., supra, at 3, 18. But 
even if national banks were not already engaging in 
discriminatory lending, OCC’s failure to investigate 
their lending practices would give them a blank 
check for future discrimination.

34



35
B. States Are W ell Suited To Enforce  

State Fair Lending Laws.

Because states have the necessary resources to 
investigate and prosecute discriminatory lenders, 
they are ideally positioned to serve alongside the 
federal government as co-enforcers of fair lending 
laws. First, state enforcement agencies are by their 
nature better equipped to understand and apply their 
state’s own fair lending laws.22 Second, because they 
are responsible for a smaller geographic area, state 
enforcement agencies can conduct more 
comprehensive investigations. Third, and perhaps 
most importantly, states have substantial manpower 
to devote to scrutinizing the lending practices of 
national banks: collectively, state banking agencies 
and state attorneys general employ roughly seven 
hundred full-time examiners and attorneys to monitor

22 Indeed, states have enacted a variety of 
antidiscrimination laws designed in part to prevent 
discriminatory housing practices -  all of which OCC claims the 
exclusive authority to enforce. See, e.g ., Ala. CODE §§ 24-8-1 to - 
15 (West 2008); CAL. Gov’t Code §§ 12955-12956.2 (2008); DEL. 
CODE Ann. tit. 6, §§ 4600-4619 (West 2009); GA. CODE Ann. §§ 8- 
3-200 to -223; (West 2008); Haw. Rev. STAT. §§ 515-1 to -20 
(2008); KAN. Stat. Ann. §§ 44-1015 to -1044 (West 2008); La . 
Rev. Stat. Ann. §§ 50:2601-:2614 (West 2008); N.Y. EXEC. Law 
§§ 290-301 (McKinney 2009); N.C. Gen. STAT. Ann. §§ 41A-1 to - 
10 (West 2008); R.I. Gen. LAWS §§ 34-37-1 to -11 (West 2008); 
S.C. Code Ann. §§ 31-21-10 to -150 (West 2008); Tex. PROP. 
Code Ann. §§ 301.001-.171 (Vernon 2007); UTAH CODE Ann. 
§§ 57-21-1 to -14 (West 2008); Va. CODE Ann. §§ 36-96.1 to .23 
(West 2008); WlS. STAT. § 106.50 (West 2007).



36
compliance with consumer protection and fair lending 
laws. H o u se  V ie w s  a n d  E s t im a t e s , supra, at 16.

State enforcers have put these resources to 
good use. In 2001, for example, the North Carolina 
Attorney General’s office obtained a twenty-million- 
dollar settlement in a predatory lending case against 
Citigroup. See Christopher L. Peterson, Preemption, 
Agency Cost Theory, and Predatory Lending by 
Banking Agents: Are Federal Regulators Biting Off 
More Than They Can Chew?, 56 A m . U. L. R e v . 515, 
522 (2007). In 2003, the state agencies responsible for 
supervising banks initiated over twenty thousand 
investigations in response to consumer complaints, 
leading to over four thousand enforcement actions 
against abusive mortgage lenders. HOUSE VIEWS AND 
E s t im a t e s , supra, at 16. And although OCC thwarted 
the investigation of national banks at issue in this 
case, the New York Attorney General has continued 
to enforce its fair lending laws against other entities. 
In January 2009, for example, it reached a settlement 
with two mortgage brokers, who agreed to pay 
$665,000 in restitution to 455 African-American and 
Latino customers charged substantially higher fees 
than similarly qualified white borrowers. See Bob 
Tedeschi, Safeguarding Against Loan Discrimination, 
N.Y. T im e s , Jan. 23, 2009, at RE6.

Nor is there any reason to believe that allowing 
states to enforce their own fair lending laws would 
subject national banks to multiple, possibly 
conflicting, regulatory schemes. First, the decision to 
retain these schemes has already been made by 
Congress, see supra Part 1(B). But in any event, state 
attorneys general can and frequently do coordinate 
their efforts. For example, in 2002, a joint



37
investigation initiated by the attorneys general and 
financial regulatory agencies of nineteen states and 
the District of Columbia led to a settlement with 
Household Finance Corporation totaling nearly a half­
billion dollars. U .S. G e n . A c c o u n t in g  O f f ic e , 
C o n s u m e r  P r o t e c t io n : F e d e r a l  a n d  Sta te

A g e n c ie s  Fa c e  Ch a l l e n g e s  in  C o m b a t in g  
P r e d a t o r y  L e n d in g  62-63 (2004).23 If anything, 
allowing states to enforce their own fair lending laws 
will likely result in more enforcement -  and, 
therefore, more protection for minority communities.

As the number of investigations and enforcement 
actions by states demonstrates, many states are 
highly motivated to vindicate their citizens’ civil 
rights. Indeed, state enforcement agencies are 
especially sensitive to local concerns because they are 
in contact with their constituents more regularly. See 
Printz v. United States, 521 U.S. 898, 920 (1997) 
(“The Constitution . . . contemplates that a State’s 
government will represent and remain accountable to 
its own citizens.” (citing New York v. United States, 
505 U.S. 144, 168-69 (1992))). States have led the 
way in implementing fair housing legislation; when 
Title VIII was enacted in 1968, twenty-two states had

23See also U.S. GEN. ACCOUNTING OFFICE, OCC 
Preemption Rules: OCC Should Further Clarify the
Applicability of State Consumer Protection Laws to 
NATIONAL Banks 20 (2006) (describing cooperative judicial 
proceedings brought by states against national banks 
concerning telemarketing practices and the disclosure of 
cardholder information to third parties).



already passed fair housing legislation. Collins, 
supra, at 16, 20. Today, at least twenty-seven states 
have adopted laws designed expressly to curb 
predatory lending. See Peterson, supra, at 516 n.3 
(listing state predatory lending statutes).

This is not to say, of course, that states will 
always be better enforcers of fair lending and fair 
housing laws than the federal government. After all, 
residential segregation was perpetuated by state and 
local governments as well as by federal agencies. 
Rather, it stands to reason that the regulatory 
framework designed by Congress, in which multiple 
enforcement regimes coexist, will likely result in 
more enforcement overall, and thus more protection 
of minority communities.

38



39
CONCLUSION

For the foregoing reasons, as well as those 
outlined by the petitioner, the decision below should 
be reversed.

Joseph D. Rich 
La w y e r s ’ C o m m itt e e  

fo r  C iv il  R ig h ts  
U n d e r  La w  

1401 New York Ave. 
NW, Suite 400 
Washington, DC 20005

Joshua Civin 
NAACP L e g a l  D e fe n se  

a n d  E d u cation al , 
F u n d , In c .

1444 I Street NW 
Washington, DC 20005

John Payton
Director-Counsel 

Jacqueline A. Berrien 
Debo P. Adegbile 
Joy Milligan 
NAACP L e g a l  D e fe n se  

a n d  E d u c a t io n a l  
Fu n d , In c .

99 Hudson Street,
Suite 1600
New York, NY 10013

Respectfully submitted,

Amy Howe 
Counsel o f Record 

Kevin K. Russell 
H o w e  & R u s s e l l , P.C. 
7272 Wisconsin Ave. 
Bethesda, MD 20814 
(301) 941-1913

Pamela S. Karlan 
Jeffrey Fisher 
St a n f o r d  La w  S c h o o l  

Su p r e m e  C o u r t  
L it ig a t io n  C lin ic  

559 Nathan Abbott Way 
Stanford, CA 94305

March 4, 2009



APPENDIX



la
APPEN D IX

The Lawyers’ Committee for Civil Rights Under 
Law (“Lawyers’ Committee”) is a nonprofit civil 
rights organization that was founded in 1963 by the 
leaders of the American bar, at the request of 
President Kennedy, to help defend the civil rights of 
racial minorities and the poor. Among its other fields 
of specialization, the Lawyers’ Committee works with 
communities across the nation to combat, protest, 
and remediate discriminatory housing and lending 
practices. The Lawyers’ Committee has independent 
local affiliates in Boston, Chicago, Denver, Los 
Angeles, Philadelphia, San Francisco, Jackson, MS 
and Washington, D.C.

The National Fair Housing Alliance (“NFHA”) is 
a consortium of private, non-profit fair housing 
organizations, state and local civil rights groups, and 
individuals. It was founded in 1988 to lead the battle 
against housing discrimination and to ensure equal 
housing opportunity for all people. Through 
leadership, education and outreach, membership 
services, public policy initiatives, advocacy and 
enforcement, the NFHA promotes equal housing, 
lending, and insurance opportunities.

Founded by Charles Hamilton Houston who 
hired Thurgood Marshall as its first Director- 
Counsel, the NAACP Legal Defense and Educational 
Fund, Inc. (“LDF”) has provided legal assistance to 
African Americans and other people of color in 
securing their civil and constitutional rights for over 
six decades. Through litigation including such 
seminal cases as Shelley v. Kraemer, 334 U.S. 1 
(1948), LDF has maintained a longstanding 
commitment to eradicating discriminatory lending



and other practices that have perpetuated residential 
segregation and impeded access to economic 
opportunity. LDF has also been a zealous advocate 
for laws and policies at the federal and state levels 
guaranteeing fair lending and equal access to credit 
for all Americans.

2a