Will proposed CRA rule help or hurt Black America?

Civil rights groups cry foul as OCC urges public comments

Charlene Crowell ow contributor | 1/9/2020, midnight
Amid the tinsel and garland celebrating the holiday ..

Amid the tinsel and garland celebrating the holiday season, two important federal financial regulators were planning how the future financial needs of low-and-moderate income (LMI) communities - including neighborhoods of color - will be met. In an effort to “modernize” the 1977 Community Reinvestment Act (CRA), the board of the Federal Deposit Insurance Corporation (FDIC) recently endorsed a proposed Notice of Public Rulemaking (NPR) offered by the Office of the Comptroller of the Currency (OCC).

The rulemaking move has also triggered forceful and diverging views from a host of organizations, lawmakers, and even a member of FDIC’s board. The effects of such a financial regulatory change bring potential impacts on bank branch locations and services, as well as the types and quality of credit and investment that will be conveniently available.

From its enactment, CRA was intended to provide an enforcement provision that supported earlier civil rights laws. The law also made a federal commitment to underserved communities - both urban and rural. Even so, over the years, CRA has been contentious for deposit institutions rated for compliance, and consumers who continued to claim that access to quality financial services were in short supply.

According to OCC’s Joseph Otting, the 2019 proposal is the result of 18 months of work by staff and comments from more than 1,500 stakeholder groups, with four improvements:

  1. Clarifying what counts as CRA credit, requiring agencies to publish a list of qualifying activities;
  2. Preserving some assessment areas and creating others to better reflect significant concentrations of deposits;
  3. Assessing what portion of a bank’s retail lending is targeted to LMI consumers; and
  4. Improved reporting with transparency and timeliness.

In a recent op ed, Comptroller Otting also added a sense of urgency:

“Every month this proposal is delayed prevents billions of dollars more from helping reach communities that could benefit from greater economic opportunity. The proposal is an important step in modernizing CRA, but it is not the final one,” wrote Otting.

But apparently the large stakeholder groups OCC consulted with has yet to include the U.S. House Financial Services Committee.

“He thinks that he has the authority to do this without having to interact with us and no matter what he thinks, we think we have a responsibility to make sure that CRA is doing what it was intended to do,” said Rep. Maxine Waters, (CA-43) chair of the House Financial Services.

Waters sought but has yet to schedule OCC’s Otting to testify before the committee.

Additionally, Waters is one of several House Members who want the 60-day comment period doubled to 120 days to better allow public input. According to OCC, a meeting is still being planned; but no date has yet been finalized.

Additionally, one FDIC board member, Martin Gruenberg, issued a statement of opposition to the proposal during its December 12 meeting, criticizing the proposed one-ratio measurement, noting existing “credit deserts,” and the lack of consideration of a bank’s efforts to provide affordable products and services LMI consumers and those without bank accounts could access.