New Preemption Exceptions May Broaden State Consumer Protection Law Enforcement

By Oluwaseun O. Ajayi and Kendra C. Kinnaird

Stepped-up enforcement of state consumer protection laws in the field of home mortgage lending is inevitable for all types of lenders, including those with federal charters. Federal banks and thrifts, long accustomed to preemption, must plan to comply with a variety of state statutes and regulations. This commentary by Oluwaseun Ajayi and Kendra Kinnaird of BuckleySandler LLP addresses this topic. 

They write: "This Emerging Issues Analysis illustrates, through two decisions, the recent success of state efforts to regulate federal thrift institutions. The decisions upheld state laws and regulations under the Home Owner's Loan Act of 1933 (HOLA), 12 U.S.C § 1461, et seq., and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183 [codified in scattered sections of 12 U.S.C]. New York v. First American Corp. and McCurry v. Chevy Chase Bank narrow preemption as applied under HOLA and FIRREA, broaden the reach of state law over federal savings and loans associations, and reveal a judicial willingness to regulate the real estate lending activities of federally-chartered financial institutions under state law.

"The Dodd-Frank financial reform bill and these court rulings will likely increase plaintiff consumer lawsuits against federally chartered lenders. In addition, states are likely to continue seeking enforcement of their consumer protection statutes against federal thrifts and banks."

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Oluwaseun O. Ajayi is an associate in the Washington DC office of BuckleySandler LLP . He represents financial services industry clients in a wide range of litigation matters and government enforcement actions. He has practiced complex civil litigation and white collar criminal defense, serving on the trial team that obtained a favorable jury verdict for the defendants in In re JDS Uniphase Securities Litigation. Before entering private practice, Mr. Ajayi served as a law clerk to the Honorable John T. Noonan, Jr. on the United States Court of Appeals for the Ninth Circuit. He graduated from the Yale Law School.

Kendra Kinnaird is an associate in the Washington, DC office of BuckleySandler LLP . She represents financial services industry clients in class actions, internal investigations, and government enforcement actions. Ms. Kinnaird received her J.D. from The American University, Washington College of Law. She was a judicial intern for the Honorable Odessa F. Vincent of the Superior Court of the District of Columbia and for the Honorable Richard J. Leon of the United States District Court for the District of Columbia.