Better Markets filed a comment letter with the Office of the Comptroller of the Currency (OCC) in response to the agency’s proposal to rescind the Community Reinvestment Act (CRA) rule it finalized last year. We also joined the letters of the National Community Reinvestment Coalition and the U.S. Impact Investing Alliance.
The CRA requires banks to demonstrate that they are serving the needs of low-to-moderate income communities in which they do business. Under the CRA, the federal banking regulators are required to implement regulations and conduct supervisory examinations to assess whether a bank is indeed serving the needs of its communities.
In June 2020, the OCC amended regulations designed to implement the CRA in an effort to modernize the current rules but did so separately without the inclusion of the Federal Reserve or the Federal Deposit Insurance Corporation (FDIC). In October 2020, the Federal Reserve released its own advanced proposal far different from and materially better than the OCC’s rule. By rescinding its 2020 CRA rule, the OCC is agreeing to work with the Federal Reserve and the FDIC in developing a joint rule to modernize and strengthen CRA regulations.
Why It Matters: Passed in 1977, the CRA was intended to improve access to credit, investment and banking services in historically underserved communities. But for far too many Americans, the promises of the CRA have remained unfulfilled. The wealth gap has continued to grow over the last several decades, and a significant proportion of American society remains un- or under-banked. These deficits are disproportionately large among Black and Hispanic households.
OCC’s 2020 rule loosened and diluted CRA requirements for banks at the expense of communities currently underserved by the financial services industry. Rescinding OCC’s flawed rule is a positive step in the right direction to properly update and strengthen the implementation of the CRA to make it more inclusive and address the challenges of today’s changing economy.
What We Said: The 2020 CRA Rule must be rescinded as quickly and fully as possible to ensure that banking regulators are applying the same rules and standards to all banks while they work to propose a new rule. This would prevent additional damage from being caused by the harmful 2020 CRA Rule and set banking regulators on equal footing as they consider the future regulations to implement the CRA.
Bottom Line: Better Markets applauds the OCC’s proposed rescission of the 2020 CRA Rule. A modernized and unified CRA rule is critical to increasing the provision of lending, investment, and financial services to individuals and small businesses in low- to moderate-income communities. If designed properly, the CRA can be a critical component to starting to close the income and wealth gaps and to achieving the goal of a more inclusive American economy.