Banking Regulators to Appeal Pause on Anti-Redlining Rewrite

Banking regulators are asking a federal appeals court to overturn a Texas federal judge’s order putting their overhaul of anti-redlining rules on hold.

The Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency on Thursday filed a notice of interlocutory appeal for the US Court of Appeals for the Fifth Circuit to lift a preliminary injunction on their update to the rules governing the 1977 Community Reinvestment Act.

Judge Matthew J. Kacsmaryk of the US District Court for the Northern District of Texas slapped the injunction on the rules in a March 29 order, granting a win to the US Chamber of Commerce, the American Bankers Association, and several local Texas banking and business groups that sued to block the overhaul.

The regulatory rewrite, released in October, is intended to better measure banks’ lending into low- to moderate-income communities through mobile and online banking options that extend beyond physical branch networks. The rules also stiffen the criteria for measuring banks’ efforts to support communities in need.

The industry plaintiffs say the rule could decrease lending into targeted neighborhoods and that the implementation period is too short.

Portions of the rule were set to take effect on April 1, while others wouldn’t fully come into effect until April 2027.

As part of his order, Kacsmaryk said the rules’ effective date would be extended by a day for each day the injunction was in effect, should the overhaul survive the legal challenge.

The CRA rewrite was the first major update to the anti-redlining law since the early 1990s.

Williams & Connolly LLP and the Underwood Law Firm represent the plaintiff trade groups.

The case is Texas Bankers Association v. Office of the Comptroller of the Currency, N.D. Tex., No. 2:24-cv-00025, Notice of Interlocutory Appeal 4/18/24.