A federal judge recently dismissed a complaint brought by the New York Bankers Association (NYBA) seeking to invalidate the New York City Responsible Banking Act (the Responsible Banking Act). In New York Bankers Ass’n Inc. v. City of New York, the NYBA had filed a two-count complaint seeking a declaratory judgment that the Responsible Banking Act (codified as City Local Law 38 for the Year 2012) was preempted by state and federal law and a permanent injunction enjoining its enforcement. Although the court rejected NYBA’s arguments, it nevertheless allowed for the possibility of future litigation.

The NYBA argued, at the federal level, that the National Bank Act and the Home Owners’ Loan Act preempt the Responsible Banking Act. Specifically, the NYBA claimed that these laws vest exclusive power with the U.S. Office of the Comptroller of the Currency (OCC) to request banking records and examine depository institutions. The NYBA also claimed that the New York Banking Law grants the New York Department of Financial Services (DFS) the sole authority to regulate state-chartered financial institutions.

The Responsible Banking Act establishes an eight-person Community Investment Advisory Board (CIAB), which includes the New York City Mayor, government officials, and certain industry and consumer representatives. Specifically, the CIAB must collect information from depository institutions to assess whether they are addressing the banking and financial needs of low- and moderate-income individuals.

In holding that the NYBA lacked standing, the court noted that the Responsible Banking Act had not been fully implemented as of October 2013, when the lawsuit was filed. The court noted that the plaintiff acknowledged in its complaint that the Responsible Banking Act had “not yet been enforced” because of former Mayor Michael Bloomberg’s opposition. Among other things, the court emphasized that the CIAB had not been fully appointed when the complaint was filed. Accordingly, the court reasoned that the NYBA could not at that time show a substantial risk of harm that was “certainly impending.”

In dismissing the lawsuit without prejudice, however, the court suggested that the occurrence of certain events—including the full appointment of the CIAB—could result in a different outcome if the lawsuit is refiled at a later date. Further, while the court did not address the merits of the preemption argument, it did note that the NYAB brought “serious substantive claims.” In light of this, we fully anticipate that another challenge will be brought as the Responsible Banking Law is fully implemented by the current administration of Mayor Bill DeBlasio.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). Our attorneys, including the attorneys who joined us from the New York City litigation firm Stillman & Friedman, P.C., to form Ballard Spahr Stillman & Friedman LLP, have substantial experience in handling litigation and other matters with DFS and the New York Attorney General.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com or Marjorie J. Peerce at 212.223.0200 x8039 or peercem@bssfny.com.

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