A group of industry organizations have filed suit to block regulators’ new Community Reinvestment Act rules. According to the plaintiffs in the case, regulators are exceeding their authority with the proposed rules. Additionally, the plaintiffs argue that the new CRA rules conflict with the statutory language of the CRA.
The plaintiff groups include the U.S. Chamber of Commerce, the Independent Community Bankers of America, and the American Bankers Association. The suit, filed in Texas, names the FDIC, Federal Reserve, and Office of the Comptroller of the Currency as defendants.
What are the new CRA rules designed to achieve?
Regulators confirmed the new CRA rules in October 2023. The government claimed that the new interpretation of the CRA was part of a modernization effort for banking regulation. Specifically, agencies say that the rule modifications will help them properly regulate banks’ online and mobile application banking services.
Notably, regulators say they need the rules to deter redlining and other lending discrimination. According to the government, rule changes are needed to ensure that lenders provide fair services to low-income borrowers. In their suit, the plaintiffs claim that the new rules are more likely to reduce lending to those customers, thanks to higher costs imposed on lenders.
Pushing back on regulators
The last three years have seen an increase in the banking sector’s attempts to push back on growing regulation. Traditionally, the industry has tried to work with agencies to avoid tension. However, the current government’s posture toward the industry has already been tense, with agencies seeking ever broader powers over the sector.
The ABA released a statement announcing the new CRA rules lawsuit, noting that “ABA and our co-plaintiffs will call on the court to immediately intervene and issue a preliminary injunction that will prevent the new rules from taking effect. In addition, the plaintiffs ask the court to issue an order and judgment setting aside the CRA rules as illegal or impermissible.”
