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CRL, AFR Urge OCC Not to Weaken Standards in CRA Update

Monday, November 19, 2018
Scott Astrada

WASHINGTON, D.C. – Today, the Center for Responsible Lending, Americans for Financial Reform, and other leading national labor, civil rights, consumer advocacy, fair housing, and legal services organizations responded in a joint comment to the Office of the Comptroller of the Currency’s (OCC) Advance Notice of Proposed Rulemaking (ANPR) on how the agency should update Community Reinvestment Act (CRA) procedures. The groups pressed the OCC that any changes to the CRA must strengthen -- not weaken -- banks’ obligation to meet the needs of low-income communities and communities of color and that changes must result in expanded access to credit in historically redlined areas. The OCC is set to review all responses to the CRA ANPR in the coming months. [Note: View the full comment letter along with list of supporting organizations.]

In their comment, the civil rights, consumer advocacy, fair housing, labor, and legal services organizations raised their concerns that the focus of the ANPR was on easing compliance for lenders instead of strengthening the impact of the CRA on low-to-moderate income (LMI) communities, going against the purpose of the CRA to increase access to credit for underserved communities. 

Additionally, the groups’ comment urged the OCC to avoid a one ratio rating model because it cannot accurately assess a bank’s performance. A single ratio measure fails to ensure that low- and moderate-income communities are being served and opens the door for banks to pick and choose which communities they serve – leaving out the very communities that the CRA was enacted to support, and it eliminates the focus of CRA exams on local needs, which vary across a bank’s footprint. While objective measures of performance can be improved on CRA exams, a reduction of the CRA to only a few formulas would contradict the original local focus of the law.   

The groups wrote:

CRA requirements must remain robust so that banks lend to borrowers and small businesses in the communities where they are located to ensure that the benefits they have from a bank charter are equitably shared. Relaxing CRA requirements could lead to a 10-20% reduction in lending for LMI communities and a total loss up to $105 billion in loans over a five years period.  Ultimately, this loss would be terrible for the overall economy, which benefits from the investment in LMI communities and consumption by LMI customers. By lowering the bar for compliance and watering down CRA requirements, the OCC’s approach in the ANPR would weaken the CRA and facilitate a severe reduction in lending for the communities that continue to remain underserved by the banking sector despite reports of record profits.

The CRA is a fair lending law designed to expand financial opportunity. The law requires banks to serve the credit needs in the communities where their businesses are located. The CRA has been a key driver in financial equity, helping to spur hundreds of billions of dollars of investment in underserved areas. The coalition is urging Comptroller Joseph Otting not to create a loophole for banks to exploit, such as a proposed one-size fits all, single performance number approach. This would let banks choose to serve some communities and exclude others and still get approved for complying with the CRA. Banks could meet their CRA requirements by choosing the easiest, most lucrative activities that counted towards this single performance number test instead of actually serving the financial needs of their communities.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.