Several industry groups sued US regulators to block recent overhauls to the Community Reinvestment Act, arguing the new rules meant to tackle redlining and boost lending to lower-income areas will actually discourage banks from lending.
The American Bankers Association, U.S. Chamber of Commerce and the Texas Bankers Association were among the groups that filed the lawsuit in the Northern District of Texas against the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, according to a statement. They asked the court to vacate the final rules and will seek a preliminary injunction to pause them while the court decides.
“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 Chief Executive Officer Rob Nichols said.
Representatives for the Fed, the FDIC and the OCC declined to comment.
The CRA is a 1977 law aimed at addressing discriminatory lending practices by banks and federal agencies. It allows regulators to evaluate banks’ lending and investments in low- and moderate-income communities. In October, regulators updated the rules to cover online and mobile banking services. That means the grades that regulators give firms for lending to low- and moderate-income communities won’t be based just on the locations of physical branches. The overhaul will also stiffen other criteria for big lenders.
The effort to revamp the rules had faced criticism from both industry and consumer advocates. Banking trade groups have argued the new criteria for rating lending could make it too hard to achieve a high score. Meanwhile, critics have said the changes didn’t go far enough.
The groups behind the lawsuit say regulators exceeded their statutory authority in violation of the Administrative Procedure Act.
Copyright 2024 Bloomberg.
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