The proposed overhaul of Community Reinvestment Act (CRA) regulations has many strong features but several areas where improvements should be made, the National Community Reinvestment Coalition (NCRC) wrote in a formal comment letter submitted to federal regulators Wednesday.
“I am thrilled to see our government embracing common-sense ideas to serve the public’s interest in many areas of the proposed rules, from refining CRA exam scores to stopping internet-based lenders from escaping oversight to encouraging banks to engage in a wider range of community development funding projects. But the proposed rules could be strengthened. Significant changes will be required if the final rule is to deliver real progress in addressing the legacy of redlining in America,” NCRC President and CEO Jesse Van Tol said. “I know agency staff have worked hard to get to the current proposal, but there is work left to be done. If the agencies want to deliver a rigorous, robust and effective final rule, they need to listen to the criticisms we and other community groups have shared: Explicitly include race, close loopholes, curb housing displacement and ensure banks are truly responsive to community needs.”
NCRC’s comment letter opens by explaining how and why the final rule should incorporate racial demographic data explicitly into CRA exams and other enforcement mechanisms. It provides detailed answers to all 180 questions posed by the three bank agencies which issued the joint Notice of Proposed Rulemaking (NPR) in May – the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve.
The letter notes several other improvements that should be made in the final rule, such as:
- abandoning the proposed deregulation of fully 20% of all US banking institutions;
- making more robust changes to merger reviews to ensure they benefit the public;
- making newly-collected data on automobile and other lending available to the public;
- discontinuing the positive scoring of affordable housing projects that displace marginalized communities rather than fostering their economic security;
- better protecting tenants’ rights; and
- enhancing provisions meant to foster fair housing, including targeted efforts to create affordable housing in well-resourced areas.
NCRC’s comment letter also supports the agencies’ efforts to reduce the chronic grade inflation that has hindered CRA for decades by rating nearly all banks “Satisfactory” or “Outstanding” even as the racial wealth divides the law is intended to cure have persisted and even widened; to stop online lenders from escaping CRA scrutiny; to ensure that community development projects no longer boost CRA scores if they displace low- and moderate-income residents; and to encourage climate remediation investments and other investments that promote community health.