When Mayor Bloomberg vetoes a bill, he means business. Last week, he showed the members of the City Council that they not only need enough votes to override his veto, but they need a lawyer, too.

Three months after the City Council overrode a mayoral veto of a law that prohibits the city from doing business with predatory lenders, the Bloomberg administration has taken the council to court. In the administration’s lawsuit, filed in Manhattan State Supreme Court on February 21, the city’s attorneys argue that Local Law 36 would cause “chaos and confusion in the areas of municipal contracts, bond issues and deposits of city funds.”

Under the law, any banks that want to work with the city must give the city comptroller a guarantee in writing that they don’t make unscrupulous mortgage loans to homeowners — and that they don’t buy up such predatory loans on secondary mortgage markets. The law defines as “predatory” those loans with interest rates 6 percent higher than the prime rate, or with fees totaling more than 4 percent of the complete loan amount, that also include prepayment penalties or balloon payments. A bank is considered a predatory lender under the regulation if it makes or buys 10 such loans in any 12-month period.

These mandates, the Bloomberg administration’s lawsuit contends, will drive banks to refuse to do business with the city, costing the city “irreparable harm from the loss of potential low bidders.” Adds mayoral spokesperson Jordan Barowitz, “It could potentially send the city’s finances into chaos.”

That’s ridiculous, says the council’s general counsel, Thomas McMahon, arguing that the law would add little to bankers’ workload. All they have to do to comply, he says, is examine their loans for predatory characteristics, just as they already do to make sure those loans are financially sound. “With a minimal amount of diligence on their part, banks could greatly assist in the effort to protect homeowners,” said McMahon.

The Bloomberg administration also argues that Local Law 36 is illegal because it is preempted by New York State’s new predatory lending law, which Governor Pataki signed into law in October. That law gives victims of predatory lending a legal defense they can use in court to keep from losing their homes.

The council argues, however, that these laws serve very different purposes, and are “complementary,” said McMahon. The state is “acting as a regulator; we act as a market participant.”

Local Law 36 was slated to go into effect last Tuesday, February 18. But once the mayor’s administration filed its lawsuit, the City Council agreed to put off implementing the law until Manhattan Supreme Court Judge Marylin Diamond can hear the case. A hearing is scheduled for April 8.

But that doesn’t mean the council is caving in. “We agreed to postpone it,” said spokesperson Lupe Todd, “only because we’re confident that the judge will agree that the predatory lending law we approved is fair and accurate and can be implemented.”