Judge sides with trade groups, halts new CRA rules

A federal judge in Texas has granted a preliminary injunction to banking trade groups that seek to halt the implementation of new rules for modernizing the Community Reinvestment Act (CRA), according to court documents reviewed by HousingWire.

Judge Matthew Kacsmaryk sided with organizations including the American Bankers Association (ABA), the U.S. Chamber of Commerce and five additional trade associations at the state and national levels to issue a preliminary injunction that halts the implementation of the rules while deciding the merits of the broader case.

The injunction is extended for each day the matter remains pending, according to the judge’s order.

The revisions to the CRA aim to address issues such as the rise of mobile and online banking, as well as further efforts to combat redlining.

The plaintiffs filed the suit in February. They sought to review the new rules under the Administrative Procedures Act (APA) and ultimately vacate them, arguing that they “work a wholesale and unlawful change to a statutory and regulatory regime that, for nearly five decades, has successfully encouraged lending in low- and moderate-income neighborhoods throughout the United States,” according to the initial legal complaint.

Originally announced late last year, the new rules seek to modernize the CRA — originally passed by Congress in 1977 and signed into law by President Jimmy Carter that October — by taking advancements including online and mobile banking into account, as well as by addressing systemic inequalities in access to credit.

Agencies in alignment on the new rules include the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corp. (FDIC). Each of the agencies are named as defendants in the case.

“The final rule will better achieve the purposes of the law by encouraging banks to expand access to credit, investment, and banking services in low- and moderate-income communities; adapting to changes in the banking industry, such as mobile and online banking; providing greater clarity and consistency in the application of the CRA regulations; and tailoring to bank size and type,” Fed Chairman Jerome Powell said at the time the rules were announced.

At the time, housing organizations largely supported the revisions, including the Mortgage Bankers Association (MBA), the National Community Reinvestment Coalition (NCRC) and the National Housing Conference (NHC).

In a joint statement issued by the plaintiffs and posted by the ABA, they lauded the judge’s decision.

“While we strongly support the goals of CRA, the Final Rules exceeded the banking agencies’ regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most,” the statement read. “We look forward to litigating this matter to a final judgment.”