New York City banks are breathing a sigh of relief after a federal judge ruled that they would not have to provide detailed servicing disclosures 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, 20151 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.