American Financial Services Association v. City of Oakland (California)

Financial Institutions

Our attorneys represented members of the industry as amici in a successful preemption challenge involving a "predatory lending" ordinance adopted by the City of Oakland, California, in 2001. The ordinance, which imposed a tangled web of special requirements on mortgages based upon standards contained in the ordinance, expressly exempted mortgage lending by federal financial institutions from its ambit. Responding to a challenge by the American Financial Services Association to the validity of the ordinance under state law, the trial court concluded it was preempted by state law due to its differential treatment of state and federal institutions, but, in an effort to "save" the ordinance, severed the exemption, thereby potentially rendering the ordinance equally applicable to state and federal mortgage lenders. At that point, our clients stepped in as amici curiae, arguing on appeal that the result ordered by the trial court was preempted by federal law. The appellate court found that the ordinance was valid as enacted, however, and therefore ruled that the severance ordered by the trial court was unnecessary. The case then went to the state Supreme Court, which concluded that the ordinance was preempted under state law, applying principles analogous to those fundamental to federal banking preemption. Am. Fin. Servs. Ass'n v. City of Oakland, 34 Cal. 4th 1239 (2005). The case has broad ramifications in light of the economic importance of mortgage lending to federal financial institutions and to the economy generally, and in light of the increasing interest of local jurisdictions in considering similar "predatory lending" ordinances.

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