On July 18, the OCC, FDIC, and the Fed (the federal banking agencies or FBAs) submitted a brief requesting that the U.S. Court of Appeals for the Fifth Circuit hold oral argument and reverse the U.S. District Court for the Northern District of Texas’ decision to preliminarily enjoin a recently issued Final Rule implementing the Community Reinvestment Act (CRA). The final rule had set forth processes for the FBAs to assess whether the depository institutions they supervise would be “meeting the credit needs of its entire community.” The CRA’s final rule, announced in October 2023, would modernize the CRA, create a new category of assessment areas, and subject large banks to new development tests, among others (covered by InfoBytes here). In February of this year, and previously covered by InfoBytes, several trade associations (plaintiffs) sued the FBAs, claiming the new final rule created a “wholesale and unlawful change” to the 50-year-old statute. The district court agreed and placed a preliminary injunction on the final rule. The FBAs argued that the district court erred in granting the plaintiffs’ preliminary injunction by accepting the “grafting” of two CRA exclusions found nowhere in the statute. The regulators also argued that the CRA’s final rule was an “appropriate exercise” of their authority. Additionally, the regulators argued the district court erred in its conclusion that “any amount of nonrecoverable costs” should be considered irreparable harm. Last, the regulators averred that the district court failed to consider the equities and the public interest weight against granting the preliminary injunction.

The FBAs now, in their appeal to the 5th Circuit, made four arguments based on these alleged errors. First, the FBAs contended they did not exceed their statutory authority by issuing the final rule, which evaluated a bank’s retail lending in facility-based assessment areas because “for certain banks, the bank’s ‘entire community’ includes both the geographic areas where the bank maintained deposit-taking facilities as well as other geographic areas where the bank conducted retail lending.” Second, the regulators emphasized again they did not exceed their statutory authority by including deposit products and digital delivery systems when evaluating whether “credit needs” were being met. Third, the regulators argued that the district court erred in finding that plaintiffs showed “irreparable harm.” Fourth, the FBAs say that the district court’s assessment of the balance of equities and public interest was flawed. For these reasons, it was the regulators’ position that the district court erred in granting the preliminary injunction and that its decision be reversed.