California Supreme Court Strikes Down Oakland's Predatory Lending Ordinance
Does California state law combating predatory lending practices preempt Oakland's predatory lending law?
Yes, according to the 4-3 decision by the California Supreme Court in American Financial Services Association v. City of Oakland 05 C.D.O.S. 845 (January 31, 2005).
In 2001, California enacted new laws outlawing certain "predatory lending" practices in the subprime home mortgage market (see sections 4970-4979.8 of the Financial Code). Just days before the new state law was signed, Oakland adopted an ordinance regulating predatory lending in the Oakland home mortgage market. In a 4-3 opinion written by Justice Janice Brown, the California Supreme Court held that the Oakland law was preempted. Why? Because in enacting the new state predatory lending law, the "Legislature has fully occupied the field of regulation of predatory practices in home loans..."
Chief Justice Ronald George, joined by associate justices Kennard and Moreno, dissented, reasoning that the new state law "establishes a floor, not a ceiling, for the regulation of predatory lending practices."
For additional information on this topic or other areas of law affecting financial institutions, please contact one of the following attorneys:
Robert J. Stumpf, Jr., San Francisco 415.774.3288 rstumpf@sheppardmullin.com
Edward D. Vogel, San Diego 619.338.6529evogel@sheppardmullin.com
John R. Pennington, Los Angeles 213.620.1780 jpennington@sheppardmullin.com
Andrew J. Guilford, Orange County 714.513.5100 aguilford@sheppardmullin.com