A group of banking associations has filed suit against the Federal Reserve, FDIC, and OCC over rules that are part of the Community Reinvestment Act (CRA).
The lawsuit, filed in the Northern District of Texas seeks to vacate new rules and to receive a preliminary injunction to block the rules implementation until the case is decided. Included in the suit are the American Bankers Association (ABA) the U.S. Chamber of Commerce, Independent Community Bankers of America, Texas Bankers Association, Independent Bankers Association of Texas, Amarillo Chamber of Commerce and Longview Chamber of Commerce. According to the trade groups, the Federal Reserve, the FDIC and the OCC have all exceeded their statutory authority and have acted arbitrarily in regard to the recent CRA rules.
“We strongly support and appreciate the goals of the Community Reinvestment Act, but in this exceedingly complex rulemaking, the agencies have created a CRA evaluation framework that unlawfully exceeds what Congress authorized and fails to recognize banks’ demonstrated commitment to fully serving their communities,” ABA President and CEO Rob Nichols said. “Even more troubling, the Final Rules risk undermining the very goals of CRA by creating disincentives for banks to offer certain products or lend in geographies outside of their branch network. Given federal regulators’ failure to respond to public comments and fix significant flaws in this rulemaking, we were left with no choice but to reluctantly file this lawsuit.”
Nichols said in 2022 banks had provided more than $227 billion in capital to low- and moderate-income communities via mortgages and small business loans, as well as providing an additional $151 billion in community development loans.
The complaint said the new rules will limit future bank lending. Additionally, the law suit said, the rules would give federal regulators authority far exceeding their statutory authority in violation of the Administrative Procedure Act. The final rules would allow regulators to evaluate bank lending well beyond banks’ deposit-taking footprint, and to evaluate some institutions’ records of providing deposit products and services to low- and moderate-income consumers despite CRA only authorizing regulators to assess a bank’s record of meeting credit needs of local communities.
According to the Chamber, the new rules run counter to what CRA was originally for.
“The new rules are counterproductive to the purpose of the Community Reinvestment Act, which was intended for banks to meet the credit needs of traditionally underserved communities where they operate,” Neil Bradley, U.S. Chamber chief policy officer, executive vice president, and head of strategic advocacy, said. “The rules ignore that community focus and will cause banks to limit lending across sectors, significantly impacting small, Main Street businesses.”