Federal Court Rules NYC’s Responsible Banking Act Preempted by NBA

Case: New York Bankers Association v. City of New York

Issue: Whether New York City’s Responsible Banking Act violates the preemption doctrine of the National Bank Act.

Case Summary: A New York district court ruled that New York City’s Responsible Banking Act (RBA or the ordinance) is preempted by the National Bank Act (NBA).
The RBA was enacted in 2012 and established an eight member Community Investment Advisory Board (CIAB) to provide a written assessment of the “credit, financial and banking services needs through NYC with a particular emphasis on low and moderate income individuals and communities.” The CIAB was tasked with collecting information at the “census tract level” to evaluate each deposit bank’s efforts to address to needs of each area. The CIAB published this information in its annual report to identify any deposit bank that failed to provide the required information.

The New York Bankers Association (NYBA) brought the suit challenging the ordinance for its improper regulations on national banks in violation of the preemption doctrine of the NBA.

The New York district court ruled that the ordinance was preempted by the NBA. First, the court found that the ordinance impermissibly regulated core banking activities by coercing banks to provide data and information to the CIAB under the threat of reputational injury and encouraging banks to modify loans or increase lending for low and moderate income individuals. Second, the court found that the ordinance improperly granted visitorial powers to the CIAB because the NBA grants exclusive visitorial power over national banks to the Office of the Comptroller of the Currency (OCC). Finally, the court held that the ordinance conflicted with the Community Reinvestment Act (CRA) because the ordinance was more burdensome than the CRA, and in the court’s view, the ordinance stood as an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

Bottom Line: The district court’s ruling aligned with the arguments in the ABA’s amicus brief.