Full court press
Our banks, unlike other financial institutions such as credit unions, not only comply with the Community Reinvestment Act, they often far exceed statutory requirements.”
For the third time since 2022, TBA is going to court to challenge federal regulators. It is not what we want to do but we must defend community banks and their customers.
On Feb. 5, 2024, TBA, along with the American Bankers Association, the U.S. Chamber of Commerce, Independent Community Bankers of America, the Independent Bankers Association of Texas, Amarillo Chamber of Commerce and the Longview Chamber of Commerce, filed a suit 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 (CRA) rules.” The lawsuit asks the court to vacate the Final Rules, and as of press time, we are seeking a preliminary injunction, pausing the new rules while the court decides the merits of our case.
When we filed the suit, it was clear that this was NOT a challenge to the objectives of community reinvestment. Our banks, unlike other financial institutions such as credit unions, not only comply with the Community Reinvestment Act, they often far exceed statutory requirements. Community investment is what our members do best.
This is, however, a fight against regulators that have assumed authorities that they have not been granted by Congress — just as we have alleged in our successful legal challenge to CFPB’s UDAAP guidance and in our ongoing lawsuit against the Bureau’s Sec. 1071 Final Rule. Yet again, federal regulators failed to follow the Administrative Procedure Act and legitimately assess the impact of their actions, which will make it more difficult for banks to serve all communities.
Under the new CRA rules, federal regulators intend to evaluate bank lending well beyond banks’ deposit-taking footprints. Regulators also wrote a new law to assess a bank’s record of providing deposit products and services to low- and moderate-income consumers, even though Congress only authorized regulators to assess a bank’s record of meeting the credit needs of its local communities under CRA.
Federal agencies should not assume powers unless specifically granted to them by Congress. Unfortunately, we see over and over that the agencies are assuming powers not specifically granted by Congress. Such a self-serving assumption of authority undermines the Constitution’s separation of powers. It further politicizes banking at a time when families, small businesses and the community banks that serve them need certainty.
One can only conclude that some Federal regulators have adopted a brazen strategy to go as far and fast as they can, betting that Congress and the courts cannot keep up with their ability to bureaucratically promulgate thousands of pages of regulation, whether authorized by the people’s elected representatives in Congress or not.
As long as this continues and as long as tight margins in Congress hinder proper oversight, the option to challenge unlawful Federal regulatory overreach via the courts must remain on the table.
Check out Celeste Embrey’s column in this edition of Texas Banking to read more about TBA’s legal efforts to defend Texas banks and their customers from government overreach.