© Reuters.
By Pete Schroeder
WASHINGTON (Reuters) -Some of the largest U.S. banking and business groups on Monday sued three bank regulators over recently-updated fair lending rules, escalating Wall Street’s counter-attack against what banks say are overreaching new regulations.
The lawsuit, filed in the Northern District of Texas, seeks to vacate new rules enforcing the Community Reinvestment Act (CRA), arguing they exceed the regulators’ statutory authority, are too complex, and could disincentive lending.
It was filed by the American Bankers Association (ABA), Chamber of Commerce and Independent Community Bankers (NASDAQ:ESXB) of America, among other groups. It seeks a preliminary injunction halting the rules’ enforcement while the courts consider the matter.
The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency last year updated their rules enforcing the CRA, a 1977 fair lending law that seeks to ensure banks lend in their local communities.
“Given federal regulators’ failure to respond to public comments and fix significant flaws in this rulemaking, we were left with no choice but to reluctantly file this lawsuit,” ABA CEO Rob Nichols said in a press release.
Conceived to prevent red lining – a discriminatory practice where banks refuse or offer only limited lending to certain areas or populations, primarily minorities – CRA regulations gauge how well banks service areas where they operate. The new rules broaden the geographies in which lenders will be required to extend loans and other services to low-income Americans.
The regulators, which did not immediately provide comment, said the review was a much-needed modernization which reflected the rise of online banking and the decline of bank branches.
The lawsuit is the latest legal challenge by lenders which, facing a wave of new rules and encouraged by a sympathetic judiciary, are growing bolder about fighting Democratic President Joe Biden’s regulators in court.
Over the past 18 months, more than 30 companies and trade groups representing banks, funds and other firms have brought at least 15 suits against financial regulators over major rules, policies and supervision issues, Reuters reported in November.
But while suits against the consumer watchdog and securities regulator are common, it is rare for banks to take on their prudential supervisors, particularly the Fed. According to research by Wharton School professor David Zaring, neither industry groups nor individual lenders have filed more than one suit over the past decade challenging Fed policymaking.
The most recent comparable challenge was in 2013, when the ABA sued the Fed over proprietary trading rules, according to a Reuters analysis of Fed annual reports.
Source: Investing.com
