Over the past six weeks, opposition to the OCC’s Community Reinvestment Act (“CRA”) final rule has hardened on two fronts.  The OCC’s decision to hurriedly issue the final rule on May 20, 2020 without achieving consensus with the FDIC, the agency with which the OCC had jointly issued the proposed rule, has drawn the ire of both consumer advocacy groups and Congress.

First, consumer advocates have vigorously opposed the rule. Within hours after the OCC issued its CRA final rule on May 20, a consortium of 15 consumer advocacy and civil rights groups issued a joint statement decrying the rule and calling on President Trump to immediately suspend it.  The groups argued that the OCC had “fractured the interagency consensus around CRA enforcement” by acting solo when CRA reform should be uniform for all depository institutions.  The groups also argued that the final rule had been hastily issued in the midst of a pandemic that was hitting lower-income communities and communities of color the hardest, which would be harmed by the rule at a time when the racial wealth gap is widening.

On May 21, 2020, the National Community Reinvestment Coalition (“NCRC”), the California Reinvestment Coalition (“CRC”), and Democracy Now announced their intent to sue the OCC, stating that the agency was “unlawfully gutting” the CRA and pointing out that the agency had issued the final rule just five weeks after the public comment period had closed on the proposed rule.  Citing the lack of a “fair and transparent” rulemaking process, the groups stated that they would see the OCC in court.

The NCRC and the CRC followed through on their promise by filing a lawsuit against the OCC and the Acting Comptroller Brian Brooks on June 25, 2020. Represented by Democracy Now, the two consumer advocacy groups filed suit in the U.S. District Court for the Northern District of California.  The plaintiffs’ complaint alleges that the OCC violated the Administrative Procedure Act in its haste to release the final and that the final rule lacks sufficient legal, analytical and public support.  In particular, the plaintiffs accuse the OCC of refusing to release the underlying data and analysis that went into the proposed rule and final rule, making it impossible for the groups to “fully and meaningfully” evaluate the new CRA framework due to the lack of a complete rulemaking record.  The plaintiffs also argue that the new rule would dilute bank investment in low- and moderate-income communities in ways that are “contrary to the letter and spirit” of the CRA.

In their complaint, the NCRC and the CRC seek declaratory and injunctive relief, specifically requesting that the court declare the OCC’s CRA final rule unlawful and set it aside. NCRC and CRC may have difficulty demonstrating the kind of injury needed to establish standing, however, so that could present a legal obstacle to the lawsuit proceeding.

Second, on June 11, House Democrats – led by Rep. Maxine Waters (D-CA) and Rep. Gregory Meeks (D-NY) – introduced a joint resolution to overturn the OCC’s CRA final rule (H.J. Res. 90).  The one paragraph resolution seeks Congressional disapproval of the OCC CRA final rule and to deem such rule of “no force or effect.”  The joint resolution introduced by Representatives Waters and Meeks was brought under the Congressional Review Act of 1996, which permits members of Congress to challenge an agency rule within 60 legislative days of publication.

On June 29, the House passed the joint resolution by a vote of 230 to 179, voting along party lines, and the resolution now goes to the Senate.  For the resolution to pass, it will require a majority vote of the Senate, as well as President Trump’s signature.  The joint resolution is unlikely to be passed by the Senate, much less reach the President’s desk, so steep hurdles remain.  But even though the joint resolution passed by the House is seen as largely symbolic, it could get traction in the current political and economic climate.

Senator Elizabeth Warren (D-MA), a strong voice in consumer protection, also opposes the CRA final rule.  On June 7, 2020, Senator Warren wrote a letter to Acting Comptroller Brian Brooks asking him to withdraw the CRA final rule immediately and to recuse himself from all future CRA rulemakings because of his previous work at OneWest Bank with former Comptroller Joseph Otting. OCC Acting Comptroller Brooks had served as Vice Chairman at OneWest Bank from 2011-2014, and the bank was sued in 2017 by community groups for alleged housing discrimination.  Senator Warren is among several contenders to be considered as a potential running mate for Democratic presidential candidate Joe Biden.

The NCRC, CRC and Democracy Now called the CRA a “civil rights law,” and Representatives Waters and Meeks also characterized the CRA as a civil rights law.  Although introduced in 1977 to address discriminatory lending practices in low- and moderate-income areas, including redlining, the CRA focuses not on civil rights, but on poverty and, in particular, the financial needs of low- and moderate-income individuals and their families.  This new development, while understandable following the nationwide protests against police violence arising following the deaths of George Floyd and Breonna Taylor, is noteworthy and focuses significant attention on the OCC’s final CRA rule.

With the upcoming presidential election and the way the New Civil Rights Movement is shaping public debate, it is possible that the OCC’s final rule could be either amended or withdrawn by the agency itself.  Alternatively, Democratic Senators may force a vote on the House’s Congressional Review Act resolution within the 60-day time table.  At a minimum, the Congressional Review Act resolution is a shot across the bow that should Democrats win back the White House, a new comptroller could rewrite the OCC’s CRA final rule.  Only time will tell as the consumer advocacy groups’ lawsuit gets underway and the politics in Washington unfold.

This is the third in a series of five blog posts about the OCC’s CRA final rule.  The first blog post described what changed from the OCC’s proposed rule to the final rule, and the second blog post explained differences among the OCC’s final rule, FDIC’s proposed rule and the Federal Reserve’s existing rule.