New fair lending regulations are blocked by a federal judge in Texas

New fair lending regulations are blocked by a federal judge in Texas
FILE PHOTO: U.S. Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

A federal judge in Texas on Friday halted the implementation of new rules that were implemented under the Biden administration and aimed to change the way lenders provide low- and moderate-income Americans with loans and other services.

The American Bankers Association, the U.S. Chamber of Commerce, and other banks and business organizations were supported by U.S. District Judge Matthew Kacsmaryk of Amarillo, Texas, who ruled that the new regulations violated the Community Reinvestment Act of 1977.

The court, a Republican appointee of former President Donald Trump, opened a new tab to prevent their implementation before they could take effect on Monday. The judge issued a preliminary injunction. Requests for comments from the agencies and trade associations were not answered.

In an effort to guarantee banks lend in their local communities, the 1977 fair lending law was enforced by the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency. These agencies revised their regulations implementing the statute last year.

CRA laws measure how well banks service the communities where they operate. They were created to avoid redlining, a discriminatory practice when banks refuse or offer only limited lending to certain areas or populations, especially minorities.

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The regulators stated that the new regulations, which expanded the geographic scope in which lenders had to provide low-income Americans with loans and other services, were necessary to take into account the growing popularity of internet banking and the closing of physical bank branches.

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However, Kacsmaryk concurred with the banking and business associations that had filed a lawsuit in February, arguing that the new rules exceeded the authority granted under the 1977 law.

He claimed that the regulations went too far in permitting regulators to evaluate banks not only in the areas where they have physical branches but also in other areas where they provide retail loans and in permitting them to evaluate the accessibility of a bank’s deposit products—rather than just credit—in a community.

According to Kacsmaryk, the authorities had never before asserted their right to evaluate banks in any location where they provided retail loans. “On the contrary, they have — since 1978 — limited themselves to areas surrounding deposit-taking facilities,” he stated.

Being the only sitting judge in Amarillo, Kacsmaryk has contributed to the courthouse becoming a preferred venue for conservative litigants opposing federal government initiatives under the term of President Joe Biden.
When he decided to halt the approval of the abortion drug mifepristone last year, he attracted national attention. The drug is still available for purchase until the U.S. Supreme Court reviews the issue, which it heard arguments in on Tuesday.

Earlier this month, the judiciary’s policymaking body, the U.S. Judicial Conference, enacted a discretionary policy intended to ensure that cases contesting laws are assigned to judges at random and cannot be “judge shopped” by litigants to jurists who share their views in single-judge courts.

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Nate Raymond reported from Boston, and Kim Coghill handled editing.

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