83-6

April 19, 1983

President
Bank (In Organization)

Re: Federal Savings and Loan Associations — Advertisements
Dear Mr. ________:
This is in reply to your letter of March 18, 1983.
Back in 1951, the Superintendent of Banks brought an action against a federal savings and loan association, alleging that the association’s advertising gave the impression that the association was a bank and thus was in violation of Financial Code Sections 3390 et seq. However, the United States District Court for the Southern District of California held that a federal savings and loan association was not subject to such state statutes. (People v. Coast Federal Savings and Loan Association, 98 F.Supp. 311.)
More recently, the Federal Home Loan Bank Board filed a lawsuit in the United States District Court in Oklahoma City, seeking to enjoin the Oklahoma Banking Commissioner and Attorney General from continuing court action to stop a federal savings and loan association from using the term “bank” in its newspaper ads. A copy of an article relating to the lawsuit is enclosed.
Under the rule established in the Coast Federal Savings and Loan Association case, we are not able to take action against a federal savings and loan association for a violation of Financial Code Sections 3390 et seq. As you know, ________ is a federal association. We do not believe that it would be appropriate at this time to bring an action against ________ and attempt to overturn the rule established in the Coast Federal Savings and Loan Association case. Bringing such an action would require an allocation of substantial resources; at this time the Department’s resources, particularly in the Legal Division, are quite limited, and the demands on those resources are extensive. However, we will monitor developments in the litigation in Oklahoma; and, if that litigation develops a rule which is different from the rule set forth in the Coast Federal Savings and Loan Association case and which grants state authorities the power to enforce state laws on advertising agagainst federal savings and loan, we will reconsider the matter.
Very truly yours,
HAROLD D. DOYLE
Acting Superintendent of Banks
By
JAMES F. CARRIG
Chief Counsel