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NATIONAL STATE BANK v. LONG

January 9, 1979

The NATIONAL STATE BANK, ELIZABETH, N. J., a Banking Corporation of the United States of America, and New Jersey Bank (National Association), a Banking Corporation of the United States of America, Plaintiffs,
v.
Virginia LONG, Commissioner, Department of Banking, State of New Jersey, Defendant



The opinion of the court was delivered by: BARLOW FISHER

This matter is currently before the Court on cross-motions for summary judgment. Fed.R.Civ.P. 56. The plaintiffs, two national banks located in New Jersey, filed this complaint on October 19th, 1977. The complaint names as defendant the Commissioner of Banking of New Jersey. On January 27th, 1978, the City of Newark, the Coalition for a United Elizabeth, and the Hudson Alliance for Neighborhood Decision filed a motion for leave to intervene as defendants. Fed.R.Civ.P. 24. In an oral opinion delivered on February 21st, 1978, this Court denied the motion to intervene but granted the three groups leave to file an amicus curiae brief.

As filed, the complaint alleges that the application of certain aspects of the New Jersey anti-redlining *fn1" law, N.J.Stat.Ann. 17:16F-1 to F-11 (hereinafter referred to as the state act), and regulations promulgated thereunder, to national banks violates the supremacy clause of the United States Constitution. U.S.Const., art. VI, cl. 2. Specifically, the complaint alleges that Congress, through the enactment of the Home Mortgage Disclosure Act of 1975, 12 U.S.C. §§ 2801-09 (hereinafter referred to as HMDA), has pre-empted those aspects of the state act and regulations aimed at requiring national banks to report and disclose information concerning their residential mortgage lending activities. See Complaint, filed Oct. 19, 1977, at PP 30 & 31. Notwithstanding the limited allegations of their complaint, the plaintiffs, during the course of this litigation, have broadened their challenge to encompass the entire state act, not just the state act's reporting and disclosure requirements. Also, the plaintiffs have asserted that the congressional intent to pre-empt the field covered by the entire state act can be seen in the Community Reinvestment Act of 1977, 12 U.S.C. §§ 2901-05 (hereinafter referred to as CRA), as well as the HMDA. See Supplement Brief in Support of Plaintiffs' Motion for Summary Judgment, at ii, v, 4-5 (hereinafter cited as Plaintiffs' Supplemental Brief). Since the defendant has responded to these additional allegations, *fn2" they are properly before this Court even though the complaint has not been formally amended. See Fed.R.Civ.P. 15(b). In terms of relief, the plaintiffs' complaint seeks a judgment declaring the state act, and regulations promulgated thereunder, unconstitutional with respect to plaintiff national banks and a permanent injunction prohibiting the defendant from enforcing the state act and regulations against plaintiff national banks. Complaint, Supra, Prayer for Relief, at PP 1-3.

 The pending cross-motions for summary judgment were originally argued on April 24th, 1978. At that time the parties agreed to the Court's suggestion that we stay this decision pending the resolution of a state case challenging the state regulations on state law grounds. On June 30th, 1978, the Appellate Division of the New Jersey Superior Court upheld the state regulations in most respects. New Jersey Bankers Association v. Commissioner of Banking, No. A-417-77 (App.Div., June 30, 1978). Following the decision of the appellate division, the parties submitted additional briefs and the cross-motions for summary judgment were re-argued on October 18th, 1978.

 After setting out the statutory framework, we will consider whether the state act and regulations, in whole or in part, have been pre-empted with respect to plaintiff national banks.

 I. THE STATUTES.

 The parties to this litigation have asserted that the following three federal statutes have some impact on the issue of pre-emption: the HMDA; the CRA; and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-91f (hereinafter referred to as the ECOA). All three statutes appear to have at least some impact on the practice of redlining. After briefly describing the provisions of these three federal statutes, we will outline the terms of the state act.

 The HMDA requires various "depository institutions", 12 U.S.C. § 2802(2), to maintain and publicly disclose information concerning their residential mortgage loan activity. 12 U.S.C. § 2803. The purpose of the act is to provide citizens and public officials with "sufficient information to enable them to determine whether depository institutions are filling their obligations to serve the housing needs of the communities and neighborhoods in which they are located . . . ." 12 U.S.C. § 2801(b). The HMDA does not prohibit the practice of redlining. Enforcement of the act's reporting and disclosure requirements is entrusted to various federal financial supervisory agencies. 12 U.S.C. § 2804. The act also authorizes the Federal Home Loan Bank Board to make recommendations to Congress for additional legislation. 12 U.S.C. § 2806(b). On the issue of its relation to state law, section 306 of the HMDA states:

 
(a) This chapter does not annul, alter, or affect, or exempt any State chartered depository institution subject to the provisions of this chapter from complying with the laws of any State or subdivision thereof with respect to public disclosure and recordkeeping by depositor institutions, except to the extent that those laws are inconsistent with any provision of this chapter, and then only to the extent of the inconsistency. The Board is authorized to determine whether such inconsistencies exist. The Board may not determine that any such law is inconsistent with any provision of this chapter if the Board determines that such law requires the maintenance of records with greater geographic or other detail than is required under this chapter, or that such law otherwise provides greater disclosure than is required under this chapter.
 
(b) The Board may by regulation exempt from the requirements of this chapter any State chartered depository institution within any State or subdivision thereof if it determines that, under the law of such State or subdivision, that institution is subject to requirements substantially similar to those imposed under this chapter, and that such law contains adequate provisions for enforcement. Notwithstanding any other provision of this subsection, compliance with the requirements imposed under this subsection shall be enforced under
 
(1) Section 1818 of this title in the case of national banks, by the Comptroller of the Currency; and
 
(2) Section 1464(d) of this title in the case of any institution subject to that provision by the Federal Home Loan Bank Board.

 12 U.S.C. § 2805. The HMDA expires in 1980. 12 U.S.C. § 2809.

 The CRA, like the HMDA, does not expressly prohibit redlining. Under the CRA, the "appropriate Federal financial supervisory agency", 12 U.S.C. § 2902(1), is directed to assess the record of "regulated financial institution(s)", 12 U.S.C. § 2902(2), in meeting the credit needs of the entire community. 12 U.S.C. § 2903(1). Furthermore, the appropriate federal agency is to consider such record in evaluating an institution's application for a "deposit facility". 12 U.S.C. §§ 2902(3), 2903(2). The CRA does not require that the federal agency deny an application for a deposit facility even if an institution's record of meeting the community's credit needs is poor. Unlike the HMDA, the CRA contains no express provision establishing its relationship with state law.

 The ECOA has been cited by the defendant in support of her contention that Congress has not pre-empted the field of anti-redlining legislation with respect to national banks. See Brief in Response to Plaintiffs' Supplementary Brief, at 8-11 (hereinafter cited as Defendant's Responsive Brief). The ECOA prohibits discrimination in any credit transaction

 
(1) on the basis of race, color, religion, national origin, sex or marital status, or age . . . ;
 
(2) because all or part of the applicant's income derives from any public assistance program; or
 
(3) because the applicant has in good faith exercised any right under this chapter.

 15 U.S.C. § 1691(a).

 The ECOA creates a private right of action in an "aggrieved applicant". 15 U.S.C. § 1691e(a). While the ECOA's legislative history suggests that the act was designed to prohibit redlining, See Statement of Representative Wylie, 121 Cong.Rec. 16,742 (1975), the act does not expressly ban discrimination based on the geographic location of property used to secure the extension of credit. Thus, the act appears to reach redlining only if the refusal to make a mortgage loan can be shown to be based on one of the elements listed in 15 U.S.C. § 1691(a). In terms of its relation to state law, the ECOA states:

 
(e) Where the same act or omission constitutes a violation of this subchapter and of applicable State law, a person aggrieved by such conduct may bring a legal action to recover monetary damages either under this subchapter or under such State law, but not both. This election of remedies shall not apply to court actions in which the relief sought does not include monetary damages or to administrative actions.
 
(f) This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter, from complying with, the laws of any State with respect to credit discrimination, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. The Board is authorized to determine whether such inconsistencies exist. The Board may not determine that any State law is inconsistent with any provision of the subchapter if the Board determines that such law gives greater protection to the applicant.
 
(g) The Board shall by regulation exempt from the requirements of sections 1691 and 1691a of this title any class of credit transactions within any State if it determines that under the law of that State that class of transactions is subject to requirements substantially similar to those imposed under this subchapter or that such law gives greater ...

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