On March 29, 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction prohibiting enforcement of the new Community Reinvestment Act (“CRA”) regulations against the plaintiffs in the case.
The CRA, passed in 1977, generally requires insured depository institutions to participate in investment, lending, and service activities that help meet the credit needs of their designated assessment areas—particularly low- and moderate-income communities and small businesses and farms. In October 2023, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Board”), and the Federal Deposit Insurance Corporation (“FDIC”) (the “Agencies”), which enforce the CRA, adopted new regulations significantly overhauling the existing CRA regulatory regime. We previously reported on the new CRA regulations here and here.
In February 2024, several banking trade associations filed a lawsuit in federal court challenging the new regulations and alleging that the new regulations run afoul of the CRA by evaluating banks (1) outside of the geographies where they operate physical facilities and accept deposits and (2) on deposit products, in addition to the existing evaluation of meeting the credit needs of the community. The District Court issued a preliminary injunction against enforcement of the new CRA regulations against the plaintiff trade associations pending resolution of the lawsuit. The District Court also extended the implementation date of the regulations as to the plaintiffs to be day for day while the injunction is in place.[1]
The scope of the preliminary injunction is limited to the plaintiffs, and, as it stands, does not apply to any other banks subject to the CRA. As a result, we expect that other trade associations or banks may try to join the case to obtain the benefits of the injunction, as we have seen in other recent cases challenging federal financial regulations. Another possibility is that the District Court could amend the preliminary injunction to apply to all banks impacted by the new CRA regulations.
In the meantime, separate from the lawsuit, the Agencies extended the deadline for most portions of the new CRA regulations that were initially set to go into effect on April 1, 2024: the delineation of facility-based assessment areas and the public file requirements. The Agencies extended the deadline for these two requirements until January 1, 2026, when the majority of new CRA regulations are scheduled to take effect.
[1] Interestingly, the District Court applied the injunction to the “Plaintiffs,” and not expressly to their member banks. However, applying the injunction to the plaintiffs’ members was most likely the District Court’s intention considering the plaintiffs are trade associations.