Memorandum of Law in Support of Plaintiffs' Motion for a Preliminary Injunction

I. INTRODUCTION

The Community Reinvestment Act of 1977 (“CRA”), 12 U.S.C. § 2901 et. seq., is a landmark piece of legislation that Congress enacted to reverse years of government policies and private market actions that deprived lower-income areas of credit due to “redlining”—the practice of refusing to extend credit in certain neighborhoods deemed too risky (primarily low income and inner-city neighborhoods). Congress found that regulated financial institutions have “a continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.” 12 U.S.C. § 2901(a)(3). Consistent with this finding, the CRA instructs the banking agencies to “assess” a financial institution’s “record of meeting the credit needs of its entire community, including low-and-moderate income neighborhoods, consistent with the safe and sound operation of such institution.” Id. § 2903(a)(1) (emphases added). Under the statute, these assessments must separately evaluate each metropolitan area in which a regulated bank maintains one or more branch offices or deposit-taking facilities, such as a deposit-taking ATM. Id. §§ 2906(b)(1)(B), 2906(e)(1). The statute, accordingly, imposes obligations on banks with respect to credit needs of the communities in which they have a physical presence and accept deposits.

The Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller of the Currency (“OCC”) (collectively “the Agencies”), however, recently published regulations in the Federal Register, 89 Fed. Reg. 6574 (Feb. 1, 2024) (to be codified at 12 C.F.R. §§ 25, 228, and 345) (hereinafter the “Final Rules”), that ignore these critical statutory limitations in at least two obvious respects. First, the Agencies seek to assess banks outside of the geographies in which they have a physical presence and accept deposits, and second, the Agencies seek to assess banks on their deposit products, rather than on their response to the credit needs of their communities. Each departure from the statutory text is plain on the face of the Final Rules, and each provides an independently sufficient basis for vacatur.

Because their members will suffer irreparable harm if forced to comply with these Final Rules before this challenge can be heard on the merits, Plaintiffs—the Texas Bankers Association, Amarillo Chamber of Commerce, American Bankers Association, Chamber of Commerce of the United States of America, Longview Chamber of Commerce, the Independent Community Bankers of America, and the Independent Bankers Association of Texas— respectfully request that this Court enter a preliminary injunction. Banks have already begun assessing the nearly 650 pages in the Federal Register that make up these Final Rules and updating their operations to ensure compliance with new and onerous data collection, validation, and reporting requirements for broad assessment areas throughout the country. That process— which will require banks to, among other things, develop and test new computer programs and data collection capabilities, conduct program planning and analyses, hire more information technology (“IT”) and compliance personnel, conduct extensive staff training, upgrade vendor relationships, and modify strategic plans to position themselves for the January 1, 2026 operational start date—will be time-consuming and costly. See generally App. 001–059, Exs. 1– 10; see also infra Parts III(C), (D). Even the Agencies concede that banks will spend hundreds of thousands of hours and over $90 million to comply with the Final Rules within the first twelve months. 89 Fed. Reg. 7106. And none of these implementation costs will be recoverable even if this Court determines that the Agencies have exceeded their statutory authority.

This irreparable harm far outweighs any interest that the Agencies or public may have in forcing banks to continue efforts to comply with the Final Rules while this litigation is pending. Under the current CRA rules, almost all banks receive an “Outstanding” or “Satisfactory” rating —removing any doubt that the present regime is serving the low- and moderate-income borrowers whom Congress sought to benefit. The Agencies’ goal to modernize the statute and expand banks’ CRA obligations, to the tune of tens of millions of dollars in compliance costs, is not a sufficient basis for upending the status quo before Plaintiffs’ claims can be heard on the merits. A preliminary injunction is plainly warranted.

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