Fourth Circuit opinion limits scope of preemption of consumer remedies

Yesterday's decision from the Fourth Circuit in McCauley v. Home Loan Investment Bank cabins the preemptive scope of the Home Owners' Loan Act and associated regulations to pre-Dodd Frank consumer claims (Dodd-Frank has changed the legal landscape going forward, but the old regulations still govern a number of cases arising out of the Great Recession). McCauley brought claims of unconscionability and fraud under state law for misrepresentations and substantive unfairness in connection with her mortgage. The Fourth Circuit held the unconscionability claim preempted because its substantive nature intruded on the federally regulated field, but the court held that a fraud claim is not preempted, because HOLA regulations do not displace "basic norms that undergird commercial transactions." Moreover, "Determining that the tort of fraud falls within the scope of [HOLA regulations] would preclude fundamental state regulation of deceptive practices in which unscrupulous savings and loan associations might engage."

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