Today, the Office of the Comptroller of the Currency (OCC) announced it will propose to rescind its controversial Trump-era rules weakening the Community Reinvestment Act (CRA) and work with other banking regulators to adopt a clear, strong and consistent update to the CRA. The previous rules were adopted by the OCC in 2020 despite widespread opposition and criticism from consumer, community and civil rights organizations, as well as many banks. They were also adopted without cooperation from the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC), the two other agencies that enforce the CRA. The announcement today follows an OCC order released in May pausing implementation of portions of the 2020 rule already in effect.
In addition, all three agencies announced that they will work jointly on a uniform, interagency overhaul of CRA rules.
Working with Democracy Forward and Farella Braun & Martel as our counsel, NCRC and the California Reinvestment Coalition filed a federal complaint in June 2020 challenging the legality of the rules. In January 2021, a federal court denied the OCC’s motion to dismiss the complaint and later stayed the lawsuit to allow the OCC to reconsider the rules after the agency represented that it would stop implementing them.
Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), made the following statement:
“This is great news and a big deal for lower-income communities and people of color who have suffered for decades from lending discrimination and underinvestment in entire neighborhoods, and also for community advocates and banks that have struggled with outdated and confusing rules. It’s also critical for families and communities of color who were disproportionately impacted by the pandemic and who now face a longer road to financial recovery.
“The 2020 CRA rules set by the OCC were a mess, a regulatory failure, and a transparent attempt to weaken the law and make it less effective by easing up on requirements for banks to meet the credit needs of all the communities where they do business.
“The shift in approach today is another step toward getting the OCC and its CRA enforcement back on track and focused on the financial needs of borrowers and communities where banks do business and take deposits. We’re pleased that the agency has recognized the flaws of the previous rule and the merits of our lawsuit, and will continue working to ensure that OCC follows through on its intention to rescind the rule.
“Based on what we’ve already seen and heard from the Federal Reserve Board, I’m hopeful that the agencies will get this right. At the same time, other changes will need to come from Congress, so we’re also looking for leadership there and from the Biden administration to expand the duty to serve all communities to other financial services providers, including credit unions, insurance and independent mortgage companies.
“It’s great to see the three banking agencies that should work together on CRA rules and enforcement finally committing to do so. Thanks to Acting Comptroller of the Currency Michael Hsu, Federal Reserve Board Chair Jerome Powell and Federal Reserve Board Governor Lael Brainard for their leadership toward new and better CRA rules and joint rule-making process. We look forward to working with them to ensure the new rules lead to better outcomes for communities that are still underserved by the nation’s financial system. These rules are technical, complex and off the radar for most people, but they influence trillions of dollars in local lending for mortgages and small businesses.
“The Community Reinvestment Act was supposed to put an end once and for all to redlining, the explicit discrimination that for decades prevented Black, Latino, immigrant and lower-income families from buying homes and building businesses. Access to capital is still unfairly and unevenly distributed, lending itself has also changed and is now both a local and digital experience, and CRA is long overdue for updates so it is both more effective and better enforced.
“A stronger and modernized Community Reinvestment Act should also be a tool to bridge and end the racial wealth divide, and that objective should be baked into the entire financial system and into all the laws, regulations and investments that will shape not only our pandemic recovery but the quality of life for millions of families for generations to come.”