Courts in two states in November struck down two so-called antipredatory-lending laws, ruling the local ordinances that sought to regulate mortgage lending practices in Cleveland, and Montgomery County, Maryland, unconstitutionally encroached upon the authority of state lawmakers.
In a 5-2 decision, the Supreme Court of Ohio, in American Financial Services Association v. Cleveland, held that three Cleveland city ordinances violated the "home rule" provision of the Ohio constitution. The court invalidated the Cleveland ordinances on the basis that they imposed regulations on local residential mortgage lenders that were more restrictive than statewide regulations enacted by the Ohio General Assembly.
The case involved three local ordinances adopted by the city of Cleveland in 2002 that prohibited various "predatory" practices by consumer-lending institutions doing business in the city. Shortly after they were adopted, the Cleveland ordinances were challenged in a court action initiated by the American Financial Services Association (AFSA), Washington, D.C.
In determining whether the Cleveland lending ordinances conflicted with the state's regulatory scheme, Justice Terrance O'Donnell, writing for the majority, pointed to prior Ohio Supreme Court decisions in which the court has held that local ordinances conflict with state laws when they "permit what the state prohibits, or prohibit what the state permits."
O'Donnell further cited decisions that have struck down local ordinances imposing speed limits that were lower than what was permitted by state law, earlier local closing times for liquor stores than were permitted by state liquor regulations, and lower local caps on BINGO parlor prizes than were permitted by state charitable gaming laws, concluding that "any local ordinances that seek to prohibit conduct that the state has authorized are in conflict with the state statutes and are therefore unconstitutional."