Who Loses in Cuomo v. Clearing House?

Adam Levitin already posted on this week's decision in Cuomo v. Clearing House Association where the U.S. Supreme Court struck down a regulation from the Office of the Comptroller of the Currency's (OCC). The regulation preempted state enforcement of consumer protection laws against national banks and grew out of subpoenas issued by the New York attorney general. At first blush, the opinion seems to be a big victory for consumers, and it certainly is a victory. As alluded in the comments to Levitin's post, the opinion might not be as big of a victory as it seems.

The Court struck down the regulation but also refused to enforce the subpoenas issued by the New York AG because of the particular wording of the National Bank Act. I'll leave out the details. The Court seems to be laying down a bright line rule: a state attorney general can file a lawsuit to enforce consumer protection laws but can't issue subpoenas under its own administrative powers. That seems to cut back a lot on what state attorneys general can do. Without the ability to force the turnover of information during their own investigations, the power that Cuomo returns to state attorneys general might not help a whole lot. The only recourse the state attorneys general have is to file a lawsuit.

I wonder whether this bright-line rule might not backfire against the national banks. Might the default position of the state attorneys general not have to be "sue first, subpoena later?" Sure, a subpoena from the state attorney general is a giant pain in the posterior, but it certainly is better than a lawsuit from the state attorney general. If the effect of Cuomo is to compel the state attorneys general to sue in order to enforce state consumer law against the national banks, the banks might come to regret what they asked for.

Comments

[Patches]

OK. Thanks to this post, I think I have a better handle on the issues... What about individuals? Can they assert their own rights under consumer protection laws in State Court?

[Judy Wagner]

How does the Obama proposal for consumer protection interact with the states' consumer protection laws? Would Obama's plan make the Cuomo decision irrelevant?

[Bob Lawless]

On Patches' question, individuals should still be able to assert their own rights under state consumer protection law. I think that was pretty clear before and virtually unassailable after the Cuomo decision.

On Judy Wagner's question, the draft legislation that Obama sent to the Hill this week (the Consumer Financial Protection Agency Act of 2009) would rewrite the preemption rules as they apply to all banking institutions, including national banks. If passed with its current language, the bill would restore all powers of state attorneys general to enforce state consumer protection law and thus would make Cuomo pretty much irrelevant. These are very early days on that piece of legislation, and any version that makes it through Congress is sure to look different than the initial draft.

[David Friend]

I would imagine the AG's of NY, Mass and California are warming up their printers, preparing a template in HotDocs, and pulling in a couple of summer interns to draft those complaints.