Question: Does California state law combating predatory lending practices preempt Oakland’s predatory lending law?

Answer: 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.”

Authored by:

Robert J. Stumpf, Jr.

(415) 774-3288


Edward D. Vogel

(619) 338-6529