Judge Rules NYC Responsible Banking Act Unconstitutional as it Conflicts with Existing Federal and State Statutes

A three-year-old law in New York City created to keep tabs on their social efforts to meet the needs of their low-income neighbors was deemed unconstitutional, according to a US federal judge.

US District Judge Katherine Polk Failla in a 71-page decision said the law conflicts existing federal and state statutes that regulate banks.

Judge Failla said, "While the animating concerns of the City Council are valid, the means by which it sought to harness banks to redress those concerns intrudes on the province of the federal and state governments."

In a statement, Nick Paolucci from the New York City law office said they're disappointed in the decision and that they're considering other options. "The city has a vital role in understanding the effect banks are having on the economic health of our neighborhoods," Paolucci added.

An advisory committee was created in 2012 to assess whether the banks in New York City deserve to receive some of the $6 billion city deposits based on how their response or service to their low-income neighbors.

Some of the large cities also passed similar law after the financial crisis.

For its previous city mayor, Michael Bloomberg, Responsible Banking Act is a "misguided attempt" as it overlaps massive state and federal regulation only to influence banks. He vetoed it, but the City Council overrode that and enacted the law anyway. Mayor Bloomberg stalled and refused to appoint anyone to the bank advisory board. When Bill de Blasio was elected mayor in 2013, the law was enforced, and an overseeing committee was appointed.

The committee recently sent letters to the banks in NYC to seek information about foreclosure actions, loan modifications, and the overall number of loans that were 60 days delinquent.

However, the New York Bankers Association resisted the request for the reason that some of the information requested was confidential. Other sighted reasons were information involving trade secrets and information too expensive to produce.

There truly is more to it than meets the eye in the judge's ruling. The Responsible Banking Act may be a knight in shining armor to a low-income neighborhood, but it bypasses federal and state laws. As Judge Katherine Polk Failla makes history, the banks in New York will continue to be supervised by state and federal regulators.