Federal judge blocks CRA final rule until lawsuit settles

A federal judge in Texas blocked implementation of the Community Reinvestment Act final rule late last week..The March 29 ruling from Northern District of Texas District Judge Matthew Kacsmaryk blocks implementation of the update until the resolution of a lawsuit federal regulators face for allegedly exceeding their authority in issuing the rule. The lawsuit was filed in February by numerous trade groups, including the American Bankers Association, Independent Community Bankers of America, U.S. Chamber of Commerce and three Texas-based business associations. . Kacsmaryk found the plaintiffs would likely prove regulators exceeded their authority by evaluating lending beyond banks' deposit-taking footprint nationwide to low- and moderate-income consumers. Kacsmaryk's ruling came only three days before the final rule was to take effect. He extended implementation dates for each day the injunction continues, pending resolution of the lawsuit..The proposed CRA update is the first in nearly 30 years to the 1977 law. The plan would require community banks with more than $2 billion in assets to comply with the same CRA evaluation standards as the largest banks, including by undergoing a new retail lending test, facing expanded assessment areas and undertaking more rigorous data and reporting obligations. .The ruling is "important and significant", because it allows impacted banks to not incur the additional expenses they would if the rule was enforced before being struck down, noted Karen Grandstrand, chair of the bank and finance group at Minneapolis-based Fredrikson. Grandstrand, who hopes the "extraordinarily complex" update will be simplified. The update fails to account for the differences between a $2 billion bank and far larger financial institutions, she added. .Trade groups praised the injunction. "While we strongly support the goals of CRA, the final rules exceeded the banking agencies' regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most," the plaintiffs wrote. "We look forward to litigating this matter to a final judgment."