Following through on an announcement made last spring, a proposal to revert anti-redlining rules to those that existed after 1995 – and rescinding new rules adopted two years ago – were proposed by the federal banking agencies late Wednesday.
The joint notice of proposed rulemaking (NPR) aims to rescind the Community Reinvestment Act (CRA) final rule issued on Oct. 24, 2023, which became effective in March 2024. The NPR would replace that rule with regulations “substantively identical to those in effect on March 29, 2024-first adopted by the agencies in 1995,” the agencies stated.
“The proposed rule is intended to restore certainty in the CRA regulatory framework for stakeholders and limit regulatory burden on financial institutions,” according to a press release.
In March, the agencies announced their intention to rescind the current rule, “in light of pending litigation.” Banking groups had challenged the rule in federal court, winning an injunction in 2024 against its implementation. The groups also filed an appellate brief in the U.S. Court of Appeals. In that brief, the groups argued that the rule (among other things) unlawfully evaluates banks’ performance nationwide, not within the bank’s “community);” is intended to only evaluate banks’ performance as to community credit needs; and inflicts “quintessential irreparable harm through significant, unrecoverable compliance costs.”
The proposal was issued with a 30-day comment period.
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