Some of the banking industry’s most powerful trade groups sued the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency on Monday, claiming regulators overstepped their authority when they updated a law intended to reverse the effects of redlining should.
In October, regulators introduced new frameworks to assess whether banks are complying with the Community Reinvestment Act of 1977, which requires banks to do business in neighborhoods largely made up of racial minorities or low-income households that they typically avoid.
The lawsuit said the rule was “a complicated and burdensome system” and could “ultimately result in reduced lending to the very populations the CRA was intended to benefit.”
The lawsuit was filed by the American Bankers Association, the Independent Community Bankers of America and the US Chamber of Commerce, trade groups that represent virtually all US banks. Several Texas groups joined as plaintiffs, allowing the Washington-based groups to sue in federal court in that state, where they have already won favorable rulings against regulators.
In a statement, Independent Community Bankers of America President Rebeca Romero Rainey said the group had “clearly stated our position and concerns” during the comment period before regulators adopted new rules, but its warnings appeared to have had little Impact on the final version of the rule.
The banks said they were not against the anti-redlining law itself, just its latest version. The 1977 law does not specifically spell out what banks must do to ensure lending to underserved communities, leaving regulators a lot of latitude in determining what is required to comply.
The lawsuit alleged that regulators exceeded their authority by requiring banks’ activities to be inspected, even if they were far from a physical branch. It also said the new rule would allow regulators to examine whether banks provide services unrelated to lending – such as checking and savings products, which are outside the scope of the 1977 law.
Monday’s lawsuit is part of a broader conflict that has been brewing in recent years between banks and their regulators, which banking groups say are unwilling to compromise. The groups have filed two other lawsuits against regulators in Texas, one to stop a new rule requiring banks to share data about their lending practices with small businesses and one over a new initiative to investigate banks for possible discrimination.
Jesse Van Tol, president of the National Community Reinvestment Coalition, which works with banks to help them meet their Community Reinvestment Act requirements, said in an email that he was “saddened and upset” by the lawsuit.
“The banking industry is showing its true colors,” he said. “No one should believe them when they say they care about lending to working-class people and people of color.”
Representatives from the Fed, FDIC and Office of the Comptroller of the Currency declined to comment.
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2024-02-06 00:01:16
www.nytimes.com
