WASHINGTON – State regulators are locked out of a slice of the home mortgage-lending industry, thanks to a recent U.S. Supreme Court decision. But the turf war between states and the federal government over banking regulations isn’t over.

A different case, launched by New York’s then-Attorney General Eliot Spitzer, now governor, will test whether states can wedge a foot in the door at national banks doing business in a state. And in Congress, there are efforts to pass a national law against “predatory” lending practices that deceive or abuse borrowers but that could, if enacted, pre-empt 37 states already equipped with consumer protections.

The outcome of the complicated, long-running feud could have repercussions for consumers of home loans and perhaps many kinds of financial services from the 1,800 nationally charted banks and an estimated 500 operating subsidiaries of national banks.

The fight is over whether state officials and/or the federal government should police financial services offered by national banks.

In a major defeat for Michigan, which was joined in its appeal by the 49 other states, the Supreme Court ruled April 17 that states have no role in regulating the licensing, reporting and examination of a national bank’s mortgage business, even if the business is conducted by an operating subsidiary, not the bank itself.

While the case centered on the mortgage business, the court’s decision might be applied to other services, such as car loans and investment advice.

The 5-3 ruling in Watters v. Wachovia means that consumers of national banks and their subsidiaries must go to the federal government – not the state – if they feel they are being cheated or have other complaints.

“Certainly the decision was a defeat for state regulators,” said Arthur E. Wilmarth Jr., a George Washington University law professor who filed court papers on behalf of states and governors and had urged the court to side with the states.

Joseph Calluroi, an attorney with Traiger and Hinckley in New York who advises financial institutions, said “state regulators met their Waterloo” in the Watters case, referring to Napoleon’s decisive defeat in 1815.

States and consumer groups fear the decision will pressure state-chartered banks to align themselves with national banks to avoid state regulations and also what they argue is more aggressive enforcement by state regulators than the federal government. “Imagine if petty thieves could pick their sheriff, they wouldn’t pick the most vigilant,” said Ellen Harnick, an attorney with the Center for Responsible Lending in North Carolina, although she added that she didn’t equate banks with thieves.

Banks and the federal government, however, argue that the decision puts an end to the hodgepodge of duplicative and conflicting federal and state banking regulations. “Instead of being distracted by who is enforcing which law, now the industry can focus on the more important issue of compliance with the law itself,” Edward L. Yingling, president of the American Bankers Association, said in a statement.

States’ roles as consumer watchdogs also are stake in the banking case filed by Spitzer that is now pending in the U.S. Court of Appeals in New York.

“The Spitzer case is equally if not more important for states and consumers,” said John Ryan, executive vice president of the Conference of State Bank Supervisors, which represents state banking departments. The issue, he said, is whether a state, through its attorney general, can enforce applicable state and federal consumer, anti-discrimination and other laws at a national bank or its subsidiary.

Banks and the federal Office of the Comptroller of the Currency (OCC), the agency that charters and supervises national banks, won a court order preventing Spitzer from investigating possible anti-discrimination violations by four national banks. Thirty-two states and a coalition of advocacy groups filed briefs in support of Spitzer’s actions.

One result of the Supreme Court’s decision restricting state regulation could be to deliver “a kick in the pants for Congress and/or the OCC” to address consumer protections, said attorney Calluroi. He maintains a federal banking examiner would be no less likely to respond to a consumer problem than a state official.