WASHINGTON — A federal judge in Texas issued an injunction against bank regulators' new Community Reinvestment Act rules, blocking the rule's enforcement until legal issues about the updated regulation can be resolved. 

The move by the Texas judge represents a win for bank trade groups, who sued their prudential regulators —  the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve —  after those regulators finalized their reforms to the CRA in October. The lawsuit claims that the regulators overstepped their statutory authority in doing so. 

"While we strongly support the goals of CRA, the final rules exceeded the banking agencies' regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most," the American Bankers Association, the U.S. Chamber of Commerce, Independent Community Bankers of America, Texas Bankers Association, Independent Bankers Association of Texas, Amarillo Chamber of Commerce and Longview Chamber of Commerce said in a statement following the judge's injunction. "We look forward to litigating this matter to a final judgment." 

The lawsuit is part of a substantial uptick in legal challenges to regulators' rules during the Biden administration. Lobbying groups representing the banking industry have become more litigious, drawing criticism from community organizations who have been arguing for reforms to the CRA for years.

"The court should reject this transparent attempt to use the legal system to disrupt the rulemaking process and permit banks to  maintain a high CRA rating while failing to meet the banking needs of the community," said Mike Calhoun, president of the Center for Responsible Lending. "It's outrageous, but not surprising, that some big banks are attempting to block oversight of the industry's lackluster record of lending to underserved and minority communities. CRA lending guidelines have not been updated in over a quarter-century, and are needed to create a fairer, future-focused financial system."

The judge in this case is U.S. District Judge Matthew Kacsmaryk in Amarillo, Texas, the lone active judge in Amarillo and an appointee of former President Donald Trump. His courthouse has become a favored venue for challengers to regulations passed by the Biden administration. 

He agreed with trade groups that bank regulators in the updated CRA guidelines surpassed what that original 1977 law allows. The regulators, Kacsmaryk wrote, might have surpassed their authorities by creating the ability for banks to be assessed beyond just where they have physical branches into where banks give out retail loans. 

A different Texas judge last week agreed to move a lawsuit to D.C., a blow to trade groups who the judge accused of "forum shopping" by filing the case in Texas in order to get a judge sympathetic to the industry. The 5th Circuit has stayed that transfer pending a hearing Tuesday on whether the transfer amounts to a denial of plaintiffs' motion for an injunction against the late fee rule.