CONSUMER
FINANCIAL SERVICES
LAW REPORT
FOCUSING ON SIGNIFICANT CASELAW AND
EMERGING TRENDS
SEPTEMBER 25, 2015 VOLUME 19 ISSUE 9
GUEST COMMENTARY
THE CRA AND LOCAL LAWS: NEW YORK CITY’S RBA FALLS TO
PREEMPTION CHALLENGE
By Frank A. Hirsch Jr. and Kendall L. Stensvad
Frank A. Hirsch Jr. is a partner in the litigation and trail practice group at Alston & Bird, and co-chair of its
financial services litigation team. Hirsch’s practice focuses on defending statutory and regulatory claims against
the financial industry and on complex commercial litigation. Kendall L. Stensvad is an associate in the firm’s
litigation and trial practice group and a member of the financial services litigation team. Reach them at
Frank.Hirsch@alston. com and Kendall.Stensvad@alston.com.
New York City banks are breathing a sigh of relief
after a federal judge ruled that they would not have to
provide detailed s ervicing disclosu res under a
preempted city law. The law, a gloss on top of the
federal Community Reinvestment Act of 1977, would
have required additional disclosures compared to what
the banks already must provide, leaving the banks
feeling more than a little exposed to the cold eye of
public scrutiny.
U.S. District Judge Katherine P. Failla offered a
welcome respite from the August heat of increasing
regulation on Aug. 7, 2015
1
when she ruled in favor of
the New York Bankers Association. The court held that
City Local Law 38 (2012), entitled the Responsible
Banking Act, is preempted by state and federal law.
While the city tried to characterize the law as simply a
way to gather information, the court exposed the city’s
primary purpose as an improper effort to regulate the
banks.
This article provides a brief overview of the federal
CRA and the New York RBA, summarizes the argu-
ments and grounds for preemption relied upon by the
court, and looks at the potential impact of the ruling
on similar city ordinances around the country.
THE FEDERAL CRA
In an effort to encourage more local investment,
Congress passed the CRA almost 40 years ago. A
2-year Banking Committee study uncovered a national
trend of “redlining” — a practice whereby banks would
seemingly draw “red lines” around population areas
where they considered residents to be bad bets for
loans.Banks may havereceived deposits fromresidents
in these areas, primarily people with low and moder-
ate incomes, but the banks would refuse to extend
them credit, regardless of the applicant’s individual
