The suit — filed by the Independent Community Bankers of America, American Bankers Association, U.S. Chamber of Commerce, Texas Bankers Association and Independent Bankers Association of Texas, among others — argues that the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency arbitrarily exceeded their statutory authority when they finalized their amendments to the CRA rules in October. The rule is the first such reform to the implementation rules of the 1977 anti-redlining law since the 1990s. The suit also calls on the court to stay the rules pending the outcome of the suit.

"The Final Rules work a wholesale and unlawful change to a statutory and regulatory regime that, for nearly five decades, has successfully encouraged lending in low- and moderate-income neighborhoods throughout the United States," the complaint argues. "These are substantial and non-compensable compliance costs, which will by their very nature force businesses to immediately forgo other pressing business priorities."

The plaintiffs argue that the final rules unnecessarily heighten the complexity and compliance burden of the CRA, ultimately undermining its very intent — to compel banks to serve the needs of the lower-income communities they serve. 

One major industry qualm deals with the agencies' decision to expand assessment areas beyond a bank's deposit-taking footprint. Rather than assess lending only in areas banks have branches, the amended rule requires banks to lend to lower-income communities in areas where they have a concentration of mortgage and small-business loans. Regulators say the updated assessment areas are meant to help calibrate the CRA so it accurately captures community needs at a time when online banking has drastically changed the geographical distribution of bank customer bases. The industry claims this diverges from Congressional intent.

"Even if the Final Rules' attempt to regulate banks in a geographically boundless manner could be understood as consistent with the authority conveyed by the CRA — and again, they cannot — their promulgation would be a clear example of economically significant agency action taken in the absence of the requisite 'clear congressional authorization,'" the complaint said.

The CRA rule also significantly expands the range of banks held to the highest standards of community lending. The final rule defines large banks as firms with $2 billion in assets or more, a far lower threshold than that used for prudential regulations like capital or liquidity rules. The argument echoes arguments against the rule offered by Federal Reserve Gov. Michelle Bowman, who voted against the final rule when it came to the Fed board for a vote.

The lawsuit further argues that the rule could lead to unintended consequences, including forcing banks to close branches or reduce product offerings. The industry groups also say regulators failed to provide evidence demonstrating the benefits of the new rules and flouted the industry's concerns raised during the public comment period. The suit also argues that the rule violates the process requirements for rules as outlined in the Administrative Procedure Act.

"[The Independent Community Bankers of America] and its co-plaintiffs will call on the court to immediately intervene and issue a preliminary injunction that will prevent the new rules from taking effect," noted ICBA in a release. "In addition, the plaintiffs ask the court to issue an order and judgment setting aside the CRA rules as illegal or impermissible."

Banks have long complained about aspects of the existing CRA regime for years, and opposed aspects of the rule since it was unveiled last fall. But it was uncertain that their opposition would culminate in a lawsuit, in part because the new rule included some provisions that banks have long sought, including a pre-approved list of activities banks can get CRA credit for.