Dive Brief:

• The National Community Reinvestment Coalition (NCRC) and the California Reinvestment Coalition (CRC) filed a lawsuit against the Office of the Comptroller of the Currency (OCC) on Thursday over its revamp of the Community Reinvestment Act (CRA), a 1977 anti-redlining law that governs lending in low-income neighborhoods.

• The lawsuit claims the new rule, which the OCC released last month, decreases bank investment in low- and moderate-income areas, is unsupported by data and ignores criticism from community stakeholders. The OCC, however, said its overhaul will strengthen the rule’s regulatory framework by making it more transparent and objective, which will encourage banks to lend in low-income neighborhoods.

• The lawsuit was filed in the U.S. District Court for the Northern District of California by legal oversight group Democracy Forward and the law firm Farella Braun + Martel.

Dive Insight:

Thursday's legal action comes as no surprise. Community groups have been outspoken in their opposition to the OCC’s CRA revamp from the start, and have said a suit was forthcoming shortly after the regulator released its final 372-page overhaul last month.

Nitin Shah, senior counsel for Democracy Forward, said he believes the OCC views community groups as "roadblocks and obstacles" rather than as "vital partners" when it comes to implementing CRA.

"When our client, CRC, raised serious concerns with the direction of the rule, a reasonable and responsible regulator's response would have been to say, 'Let's sit down and talk about this.' ... Instead, OCC's response was to send letters to CRC effectively trying to silence them," Shah told Banking Dive.

The community groups also claim the OCC has kept the public in the dark throughout its rulemaking process.

"The OCC has time and time again refused to make public the data and analysis that they claim support implementation of the framework as they've issued it in the final rule," Shah said. "Either that data analysis exists and they've unlawfully withheld it from the public and denied the public a meaningful opportunity to evaluate the rule and respond to it, or it doesn't exist, in which case they've issued a rule that is unsupported by the sort of analysis and facts that agencies are required to gather before they make substantive changes to any kind of rulemaking framework."

Shah said Democracy Forward is also representing NCRC and CRC in two additional lawsuits filed in the U.S. District Court for the District of Columbia, seeking data and information regarding the OCC’s final rule.

"The OCC’s new rule for the first time will deliver capital and credit to people whose neighborhood bank branches were closed down years ago; to Native Americans; to small businesses and family farmers; and to people with disabilities, among others," OCC spokesman Bryan Hubbard said in a statement. "We do not understand why certain groups would sue to block these benefits and restore a system whose results after 25 years were not sufficient to allay the understandable anger of communities now marching and demanding a more inclusive society— particularly since major parts of the final rule were drawn directly from these very groups’ comments during the rulemaking process." The last previous revisions to the rule were published in 1995.

House Democrats, led by Financial Services Committee Chair Maxine Waters, D-CA, and Rep. Gregory Meeks, D-NY, introduced a resolution this month seeking to undo the OCC’s final rule.

"It is completely unacceptable for the OCC to use the cover of a pandemic to rush out a rule that will be harmful to communities that are already suffering during this crisis," she said in a press release. "The Community Reinvestment Act is an essential law that was put in place to prevent redlining and to require banks to invest and lend responsibly in the communities where they are chartered."

The lawmakers' effort, however, could be futile. Any initiative blocking a rule requires a majority vote from both chambers of Congress and a signature from President Donald Trump. Neither he nor the Republican-led Senate are likely to back the measure.

In response to the resolution, Acting Comptroller Brian Brooks pushed back on claims that the rulemaking process was rushed.

In a letter sent to Waters and Rep. Patrick McHenry, R-NC, last week, Brooks said the agency "carefully considered 7,500 comments" that were submitted regarding the revamp.

Brooks became acting comptroller following Joseph Otting's resignation in late May.

"I discussed the issues with civil rights and community leaders, the National Community Reinvestment Coalition, the Center for Responsible Lending, and the Urban Institute among many others," Brooks wrote. "As a result, the agency made many important changes from the proposal, which accommodate most of the stakeholders’ specific criticisms."