American Bankers Association CEO Rob Nichols said Tuesday that the trade group had no choice but to file several lawsuits against federal regulators, arguing that the agencies "overstepped" their authority on regulations such as a revamp of the
The ABA has brought four lawsuits in recent years over rules that the group claims extend beyond the agencies' power and would hinder bank operations, Nichols said at the ABA's Washington summit. Litigation was "the only remaining tool in our box," he added, regarding the legal challenges to the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Taking bank supervisory agencies to court can be a productive way of calling out policies or processes that may be unfair, three former Trump-appointed top regulators said during a panel discussion at the summit.
"Suing the regulators is not a declaration of war," said Randal Quarles, a former vice chair of supervision at the Fed. "In my view, it's consulting the dictionary on a disputed Scrabble play. … It's a useful discipline."
Nichols said the ABA tries to work with regulators, but it must strategically wield legal action when the agencies "insist on finalizing rules that fall outside of their regulatory purview" or ignore feedback from stakeholders.
"We've had to turn to the courts to ensure that the regulations that all of you must follow reflect the law, and allow your banks to serve your customers and communities," Nichols told an audience of bankers. "Now, litigation is never, never our first or preferred course of action. But over the past few years, we've seen regulators take actions that overstepped the authority granted to them by Congress."
Ian Katz, managing director at Capital Alpha Partners, said that in recent years, the banking industry has become more willing to openly critique and sue regulators, as previous fears of retribution for legal action have dissipated.
"If banks and trade groups are in the belief that these are bad rules, they're unfair and they're too far gone to tweak to be acceptable, then [they] would feel like the only option is to sue," Katz said.
Another factor, Katz added, is the judiciary's apparent increased sympathy with industry on regulatory matters.
The two regulations that got the most attention on Tuesday were the recently updated CRA rule, which would reform the anti-redlining law enacted in 1977, and the CFPB's effort to cut credit card late fees to $8. The ABA is part of plaintiff groups that are challenging the two regulations in court.
The ABA also joined as plaintiffs in two other lawsuits alleging the CFPB exceeded its authority with respect to both a small-business lending data collection rule and an update to its exam manual on unfair, deceptive and abusive acts.
On Monday, a federal judge ordered the U.S. Chamber of Commerce, another plaintiff in the ABA's suit over the late-fee rule, to
Kathleen Kraninger, a former CFPB director, said at the summit that the ABA was right to challenge the late-fee rule in court. She argued that regulators should require the disclosure of consumer charges, rather than setting maximum fees.
The suit alleging that the FDIC, Fed and OCC exceeded their authority in finalizing the CRA update was also filed in the Northern District of Texas in February.
Nichols said Tuesday that the CRA rule should be modernized, but he argued that the current iteration creates disincentives for banks to offer certain products or lend outside their branch network.
"The agencies missed the mark, and we reluctantly had to call them on it," Nichols said. "To be clear, our nation's banks are committed to lifting up all of their customers, clients and communities. But rules that make that harder should be challenged."
John Asbury, the CEO of Richmond, Virginia-based Atlantic Union Bankshares, said during the conference that he's also in favor of CRA reform, but that the industry is pushing back because the rule will negatively impact banks' ability to serve low- and moderate-income communities.
Jelena McWilliams, former FDIC chair, said during the panel discussion that the industry should be pursuing any path to better CRA rules.
"These agencies should be challenged on how these rules are promulgated," she said.
