NEW YORK, Sept 9 (Reuters) - A federal judge has refused to block enforcement of a 2012 New York City law designed to ensure that banks holding the city’s deposits document how well they meet the needs of low- and moderate-income neighborhoods.
U.S. District Judge Katherine Polk Failla dismissed a lawsuit by the New York Bankers Association (NYBA), which said the law gave the city illegal power to regulate banks and conflicted with federal and state law.
In a 33-page decision, Failla said the bankers group had lacked standing to bring their October 2013 lawsuit because former Mayor Michael Bloomberg was refusing to enforce the law at the time, giving it “dead-letter” status.
The judge nonetheless said the group had brought “serious substantive claims,” and could try to sue again, perhaps after the city began implementing Local Law 38, known as the Responsible Banking Act.
NYBA has more than 130 members, including Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc JPMorgan Chase & Co and Wells Fargo & Co, with in excess of $10 trillion of assets. About one-fourth of the members operate in New York City.
The Responsible Banking Act would set up a Community Investment Advisory Board to review how well banks serve lower-income neighborhoods, and whether they deserve to receive some of the city’s $6 billion of deposits.
Banks would be required to document a variety of services they provide, including efforts to provide affordable housing and modify loans for struggling borrowers.
Several U.S. cities have passed similar ordinances, such as Boston, Cleveland, Los Angeles, Philadelphia and Pittsburgh.
New York’s law was passed over Bloomberg’s veto, and current Mayor Bill de Blasio has taken steps to begin enforcement.
“This is a preliminary procedural decision,” Robert Giuffra, a partner at Sullivan & Cromwell representing the bankers group, said in an email. “The court has recognized that NYBA, on behalf of its members, has brought ‘serious substantive claims,’ and we’re evaluating when to refile our complaint.”
Kate O’Brien Ahlers, a spokeswoman for the city’s law department, said the city is evaluating the decision.
In oral argument last month, Tanisha Edwards, a lawyer for the New York City Council, said any information the city’s advisory board might seek from banks would be voluntary.
“The plaintiffs just have not alleged any harm,” she said.
The case is New York Bankers Association Inc v. City of New York et al, U.S. District Court, Southern District of New York, No. 13-07212. (Reporting by Jonathan Stempel in New York; Editing by Tom Brown)