CRA Comments Review, Part 1: What Are Regulators Hearing On Race And Small Business Issues In CRA Reform?


Part One of a four-part series examining noteworthy trends in the comment letters sent to regulators as they finalize Community Reinvestment Act reform.

The public comment period ended on August 5, 2022, for the joint Notice of Proposed Rulemaking on the Community Reinvestment Act (CRA) from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). More than 4,900 comments were submitted to the agencies. Once finalized this will be the most significant change to the CRA in over two decades.

Not all of the Notice of Proposed Rulemaking (NPR) comments were made public by the agencies. In fact, out of the 4951 comments reported submitted to the government’s online comment portal, regulations.gov, only 648 were made public by the OCC as of the publication of this blog. That is roughly 13% of all comments received. 

Despite this limited disclosure, we found notable trends in the comments that have been published. Over the next few weeks NCRC will review some of the key trends visible among the one-eighth of the total comments that are publicly available. This week, we will review comments on race and on small business lending.

Lending by Race Must Be Considered on CRA Exams

One of the recurring themes in NPR comments was the desire to see race included in CRA exams. The law Congress passed in 1977 mandated that banks have an affirmative obligation to meet the needs of the communities where they are located to counter the legal practice of redlining. But while redlining was an explicitly race-based discriminatory practice, the statute referred only to economic status and not to race: CRA requires banks to meet credit needs in low- and moderate-income (LMI) communities directly emphasizing the needs of racial and ethnic minority communities historically targeted by redlining.

NCRC has both called on federal regulators to add race directly to in our own CRA NPR comment letter and made the case for such action in a report we developed with Relman Colfax PLLC months before the NPR was published. Many comments we reviewed cited NCRC’s research in arguing for race to be included in CRA rules.

Americans for Financial Reform (AFR) noted in their comment letter that while regulators have made a habit of using LMI communities as a proxy for race, that approach has been found in recent research to be an insufficient method for meeting the needs of racial and ethnic minority communities. The Greenlining Institute, an NCRC member, pointed out the ever-growing wealth and homeownership gaps between Black and White Americans as a compelling rationale for the inclusion of race in CRA. 

Other comments echoed NCRC’s position that some of the most promising improvements in the NPR nonetheless stop short of their potential. NeighborWorks Southern Colorado agreed with NCRC’s argument that CRA regulators are right to propose including HMDA data tables on lending by race, but wrong to not utilize that data to  impose stronger fair lending reviews for banks whose HMDA data indicates poor performance. NCRC and others agreed with the NPR’s proposal to use Section 1071 data on small business lending by race and gender of the business owner as a screen for fair lending reviews. The agencies proposed using the Section 1071 data when it is made available by the Consumer Financial Protection Bureau (CFPB) after the CFPB finalizes the Section 1071 regulation. Doing this would help regulators to identify persistent racial disparities that plague our nation’s communities.

In contrast to community group comments, surprisingly few bank and trade association comment letters mention matters of race at all. We will discuss bank and trade association comments in detail in another blog.

Use the More Comprehensive Section 1071 for Small Business Lending on CRA Exams 

Many comments mention small business lending. Most of those comments relate to data collection and reporting related to Section 1071 of the Dodd-Frank financial reform legislation signed in 2010. Section 1071 amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and submit specific data to the CFPB regarding applications for credit from women-owned, minority-owned, and other small businesses. Section 1071 data will allow clearer analysis of how small business loan application outcomes vary according to not only race and gender of applicant, but by the tenure, size and sector of the business. Such data could allow the fair lending reviews accompanying CRA exams to more precisely assess if banks are treating business owners fairly. 

Main Street Alliance made the case for incorporating 1071 data into CRA exams well in their comment letter: “Over the years, businesses owned by women, and in particular, Black and Latinx small business owners have experienced outright discrimination and disparities in access to credit. The Minority Business Development Administration (MBDA) found that businesses owned by non-Whites received lower loan amounts than White-owned firms. This finding remained even after controlling for the sales level of firms.” 

Main Street Alliance also believes that the data is critical for assessing the effectiveness of bank Special Purpose Credit Programs (SPCP). The agencies are considering providing favorable CRA consideration for SPCP programs that target populations or businesses that have been discriminated against and are economically disadvantaged. The Section 1071 data can document ongoing disadvantages in the credit marketplace and can also monitor the effectiveness of bank SPCP programs in reaching women- and minority-owned businesses. 

Some of the bank and industry comments available for public review actually align with community groups on Section 1071 data. American Community Bank and Trust for example supported aligning the definition of a small business loan to the proposed $5 million threshold for purposes of 1071. Only applications and loans made to businesses with revenues under $5 million would be included in the Section 1071 data. NCRC agreed that inclusion of data on applications and loans to businesses with revenues above $5 million would dilute the accuracy of Section 1071 data since lending to the larger businesses involves significantly different underwriting approaches.


Joseph Reed is the Senior Policy Advocate at NCRC.

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