Forcing national banks to comply with a New Jersey lifeline checking law would open the door to a compliance nightmare for banking companies with multistate operations.

That's the earful the Office of the Comptroller of the Currency got from bankers recently. The agency - at New Jersey's prompting - asked the industry whether a controversial 1992 decision allowing national banks to ignore the New Jersey statute should be reconsidered.

Bankers overwhelming said no, arguing that it would invite other states to impose their laws on federally chartered institutions.

"National banks are currently protected from arbitrary state legislation, but I fear that once you allow New Jersey to pierce the veil ... serious harm can accrue to the banking industry," said Dennis W. DiLazzero, president of Minotola National Bank, Vineland, N.J.

The New Jersey statute requires all banks that offer regular checking accounts in New Jersey to offer low-cost consumer checking accounts.

The Comptroller's Office agreed to put the ruling out for comment in deference to a request from the New Jersey Banking Department. However, industry sources do not expect the agency to reverse its decision.

"I doubt very much that they are going to allow any state to tell a national bank what kind of business it must engage in," said Brian W. Smith, a partner at the Washington law firm Mayer, Brown & Platt.

"The OCC may try to meet the state halfway by encouraging national banks to offer these accounts, but they are going to come down pretty much exactly where they were originally," added Mr. Smith, who was OCC chief counsel in the early 1980s.

In its original interpretation, the Comptroller's Office said the New Jersey law is preempted by the Bank Enterprise Act. That 1991 law offers reduced deposit insurance premiums to institutions providing lifeline accounts. The OCC said that under the federal law such accounts are offered voluntarily, while the New Jersey law requires them.

In November 1995, when it requested the OCC's reconsideration, the New Jersey Banking Department argued that the two laws are complementary. Its rationale: the New Jersey and the U.S. government each intended to make banking services available to low-income people.

That position prompted a critical comment from the American Bankers Association.

"The contradiction between these statutes is obvious and it is disingenuous for the New Jersey Department of Banking to suggest otherwise," wrote Michael Crotty, the ABA's deputy general counsel, and Paul A. Smith, the group's senior federal administrative counsel.

Banks that offer New Jersey lifeline accounts cannot charge more than $3 for the account, must accept initial deposits as low as $50, must provide for at least eight free checks per month, and must allow unlimited deposits.

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