Federal bank regulatory agencies issued a joint proposal to rescind the Community Reinvestment Act final rule issued in October 2023 and replace it with the prior CRA regulations after the FDIC board of directors advanced the proposal earlier this week.
About the 2023 Rule: Released in October 2023, the CRA final rule was scheduled to take effect in April, with certain bank compliance requirements becoming effective by Jan. 1, 2026, and Jan. 1, 2027. Because the 2023 final rule is subject to legal action and has not taken effect, the agencies continue to apply the 1995 regulations to banks today.
Plans for Rescission: In March, the federal banking regulators announced plans to propose rescinding the 2023 CRA rule in light of pending litigation. ICBA applauded the announcement, citing the rule’s disproportionate implementation costs for community banks.
ICBA Litigation: In September 2023, ICBA and other groups filed an appellate brief with the U.S. Court of Appeals for the 5th Circuit challenging the CRA final rule, arguing the rule unlawfully evaluates banks’ performance nationwide, not within the bank’s “community.” In their original complaint, the groups asserted that regulators exceeded their statutory authority with the CRA final rule, violating the Administrative Procedure Act, and that the rule would limit future bank lending.
Recent ICBA Advocacy: ICBA in May called on the banking regulators to rescind the CRA rule and reinstate the prior version in a letter responding to the Office of Management and Budget’s request for information on deregulation.
What It Means for Community Banks: ICBA has repeatedly said it supports agency efforts to modernize the CRA’s implementing regulations, but the October 2023 rule disregards community banks’ strong track record of meeting and exceeding the credit needs of underserved communities. If adopted, the new interagency proposal would limit regulatory burden and provide certainty on the CRA framework amid the ongoing litigation.
Outlook: Comments on the proposal are due 30 days after date of publication in the Federal Register.