Members of the Senate Banking Committee today questioned why, in the middle of the COVID-19 crisis, bank regulators are moving forward with proposed changes to the Community Reinvestment Act (CRA) that would cripple COVID-19 recovery efforts in low- and moderate-income communities and communities of color.
Jesse Van Tol, CEO of the National Community Reinvestment Coalition, made the following statement:
“CRA will be essential for COVID-19 economic recovery in the communities hardest hit by the pandemic. But the proposal from the OCC and the FDIC is a blueprint for a crisis after the crisis. They need to start over. Any changes to CRA need to help lower-income communities and communities of color recover from COVID-19, and not make things worse for them.
“The loss of CRA reviews of mortgage lending in LMI neighborhoods, the expansion of CRA credit to bank activities that provide only marginal benefits to low- and moderate income (LMI) communities, poor incentives for business and farm loans to microbusinesses, startups and minority enterprises, a weak incentive to keep bank branches open in LMI communities, low pass/fail standards and a presumptive rating framework that will juice bank CRA ratings while communities languish and try to recover, are just some of the significant issues with the proposal.
“The regulators are proposing to weaken the CRA incentives for banks to participate in critical COVID-19 recovery efforts that are just starting to get underway in LMI communities and communities of color around the country. It is going to be a long, hard slog for many of these LMI families and communities and what the regulators are pushing is a recipe for a crisis within a crisis. Stakeholders across the spectrum – banks and community advocates – have said this is not the right time to push ahead.
“The OCC’s testimony today also indicates how little the OCC has thought about the impact of their proposal. You heard Comptroller Otting speak about promoting small dollar lending, that is the exact type of lending that will be discouraged by the OCC’s changes to CRA. It is also alarming that the FDIC would choose to stay on this proposal when their agency has admitted that they don’t know how the proposal will affect levels of CRA activity. It was a bad idea to do this before COVID-19, and now it’s just reckless and seems to be driven more by an ideological interest in decreasing regulation and oversight than by the stated goals of increasing resources in underserved communities.”