A major overhaul of U.S. fair lending rules is the latest Biden-era policy to come to a sudden halt in a federal court in Texas that’s become the go-to place for banks and business groups seeking to fend off new regulations. Judge Matthew Kacsmaryk, a Trump appointee, late on Friday blocked the Federal Reserve and other financial regulators from implementing their new framework for assessing whether banks are following the Community Reinvestment Act, a landmark 1977 anti-redlining law. Kacsmaryk ruled that regulators ran afoul of the law in their attempt to modernize the rules to account for things like online deposits and take a more expansive view of the communities banks serve beyond just physical branches. He also ruled that the changes were so extensive – that is, they implicated a “major question” of economic importance – that they needed to be expressly authorized by Congress. Proponents of the new CRA rules want to see regulators appeal. David Dworkin, head of the National Housing Conference, said the Texas court was “carefully curated” and that the practice known as judge-shopping “shouldn’t be necessary when you’re confident in your case.” The Fed, OCC and FDIC declined to comment on the litigation. The regulators didn’t raise objections about the business groups and their Texas affiliates filing the case there. Kacsmaryk’s ruling is preliminary and will be further litigated. But it’s the latest high-profile example of industry groups turning to the conservative Northern District of Texas court to thwart policies from Biden-era regulators – a practice that’s drawing increasing scrutiny from opponents on the left. Senate Majority Leader Chuck Schumer on Monday vowed that the Senate would “consider legislative options” to address judge shopping after the chief judge of the Northern District of Texas said his court wouldn’t follow new recommendations aimed at bolstering the random assignment of cases. Some Republicans, including Senate Minority Leader Mitch McConnell, had decried the recommendations, calling them one-sided. “Democrats are salivating at the possibility of shutting down access to justice in the venues favored by conservatives,” McConnell said last month. Business groups have defended their strategy. Jennifer Dickey, deputy chief counsel for the U.S. Chamber, said in a statement that the organization “brings lawsuits with local partners across the country, where government micromanagement over businesses is often felt most acutely.” But liberal organizations are increasingly pushing back on the business-friendly court. Liz Zelnick, who directs the economic security and corporate power program for Accountable.US, said the group was pushing to expose the legal tactics of “moneyed, well connected groups” that she said were trying to “maximize profits and block the Biden administration at every turn.” Accountable.US notched a victory last month when Judge Reed O’Connor, a Trump appointee, recused himself from hearing banks’ challenge to the CFPB’s new limits on credit card late fees after the group raised questions about his investments in financial institutions that could benefit. Another Trump appointee who took over the case, Judge Mark Pittman, also unexpectedly pushed back against the Chamber and bank trade associations for filing their case in his court. Pittman last week sided with the consumer bureau and kicked the case to D.C. rather than blocking the rule. That fight is ongoing and could heat up again today. Banks have turned to the 5th Circuit Court of Appeals to intervene and keep the case in Texas. Last week, the appeals court said it was temporarily blocking Pittman’s decision until 5 p.m. today. Yet the case had already been transferred to the D.C. court where it’s been assigned to Judge Amy Berman Jackson, an Obama appointee. It’s Tuesday — Send tips to zwarmbrodt@politico.com. Follow Michael (@mstratford).
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