Tuesday, June 18, 2024

Trade associations file suit against regulators for CRA amendments

The American Bankers Association, the U.S. Chamber of Commerce, Independent Community Bankers of America, Texas Bankers Association, Independent Bankers Association of Texas, among others, filed a lawsuit in February in the Northern District of Texas against the Federal Reserve, FDIC and OCC for exceeding their statutory authority and acting arbitrarily and capriciously with their recent amendments to the Community Reinvestment Act rules.

The lawsuit asks the court to vacate the Final Rules, and the groups will also seek a preliminary injunction pausing the new rules while the court decides the merits of the case.
The complaint explains how the new rules will limit future bank lending, and identifies how the regulatory agencies exceeded their statutory authority in violation of the Administrative Procedure Act by:

Evaluating bank lending well beyond banks’ deposit-taking footprint, as required by CRA. The Final Rules will evaluate bank lending across the entire country, eliminating the statutory focus on a bank’s lending in its “local community.”

Evaluating some institutions’ records of providing deposit products and services to low- and -moderate-income consumers even though the CRA only authorizes regulators to assess a bank’s record of meeting the credit needs of its local communities.

The complaint highlights how the 1977 law explicitly limited regulators’ statutory authority:

“The Agencies rely heavily on the authority delegated to them ‘to carry out the purposes’ of the CRA, but that authority does not give the Agencies authority to ignore the plain text of the CRA. And even Congress’s statement of purpose focused on ‘local communities,’ a phrase that cannot be understood as capaciously as the Agencies would need it to be read to ignore the geographic limitations of deposit-taking branches.”