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The Massachusetts Bankers Association is voicing support for a lawsuit filed by national bank trade groups earlier this week over stringent and what these national groups call “counterproductive” updates made to Community Reinvestment Act rules, arguing the changes will hinder the expansion of lending in the communities that need it.
The American Bankers Association, the U.S. Chamber of Commerce, the Independent Community Bankers of America, the Texas Bankers Association, the Independent Bankers Association of Texas, the Amarillo Chamber of Commerce and the Longview Chamber of Commerce jointly filed suit against the Federal Reserve, the Office of the Comptroller of the Currency and the FDIC Monday.
Under updates to the rules implementing the landmark 1977 anti-redlining law, reaching a certain level of lending to other areas outside of the communities where a bank typically operates will trigger CRA evaluations and subject a bank to CRA obligations, even if a bank does not have a physical branch in the area. The banking and business groups’ lawsuit says the changes will cause banks to limit lending across sectors, which will affect small businesses.
“Unfortunately, the final rules are likely to have unintended consequences and fail to consider the long-term impact on the very communities they seek to protect. Rather than increasing lending in low- or moderate-income communities, the new and unnecessarily complex evaluation could result in banks being forced to close branches or reduce product offerings, in contravention of CRA’s stated purpose,” Rebeca Romero Rainey, president and CEO of the ICBA, said in a statement.
The lawsuit also argues that the three regulatory agencies went beyond their statutory authority as laid out by the Congress.
Kathleen Murphy, president and CEO of MassBankers, said the new CRA rules is “daunting, not only because of its sheer size but also its new complex formulas and calculations which do not currently exist.”
“We support the basis for the litigation that the new rule goes beyond the Congressional authority granted to the bank regulatory agencies and disregards many important comments submitted through the rule-writing process,” Murphy said in a statement. “We are hopeful this litigation will result in a rethinking of the proposal so that the CRA provides a roadmap and a structure that supports economic growth for communities across the Commonwealth and nationally as it has done since its inception.”
