The Housing Financial Services Committee met with Joseph Otting, Comptroller of the Currency, Officer of the Comptroller of the Currency (OCC), on Wednesday to discuss proposed changes to the Community Reinvestment Act (RCA).
Chairwoman of the Committee, Maxine Waters (D-California), voiced opposition to Otting’s proposal to update the legislation.
“Under Comptroller [Joseph] Otting, the Community Reinvestment Act would become the Community Disinvestment Act. Such a radical change to the CRA demands a heightened level of public scrutiny,” she said.
Waters said that proposed changes to the CRA by the OCC would lead to “widespread bank disinvestment from low and moderate communities.” She added the changes set forth by Otting would allow banks to receive a passing grade by doing the bare minimum.
Waters said Otting was determined to push changes through “as soon as possible,” allowing just a 60-day comment period. However, all 34 Democrats on the Committee, as well as other advocates, requested a minimum 120-day comment period, which has been customary for prior bills.
The CRA was enacted in the 1960s as a response to redlining—a practice where banks discriminated against prospective customers based primarily on where they lived, or their racial or ethnic background, rather than creditworthiness.
Under the current CRA framework, the primary banking regulators—specifically the OCC, Federal Deposit Insurance Corporation, and the Federal Reserve—conduct regular examinations to evaluate banks’ activities to provide credit, services, and make investments in low and moderate-income communities where the banks operate. The act only applies to banks with federally insured deposits.
The legislation was last updated in 1995.
Committee member Patrick McHenry said reform of the CRA is a “long-time coming.”
“The rise of mobile and online banking helps more consumers and communities than the CRA was intended to serve,” he said.
McHenry added that current CRA regulations are “outdated and technologically ineffective.”
Also voicing opposition was Committee Member Gregory Meeks, as he noted there is still evidence of discrimination in lending—something the CRA was meant to solve.
“Your proposal decouples CRA from outcomes for intended communities, discounts the value of direct lending in mortgages to low and moderate-income communities and communities of color, cuts out community organizations that work directly with these targeted communities, and is just not supported by data,” Meeks said of Otting’s proposal.
Meeks added that numerous banks are opposed to the plan and community groups have called possible changes “betrayal of the original intent of the CRA.”
Otting, in response to the accusations against his proposal, said his intent is to strengthen the CRA, not weaken it. He said this proposal can achieve that by utilizing four metrics: Clarify what counts, clarify where it counts, measure CRA performance, and make reporting transparent and timely.
He said that Congress was informed of a proposal to change the CRA in 2007 and the Department of the Treasury received recommendations in both 2017 and 2018.
“This has been a lengthy and transparent process and has been consistent with the letter and spirit of the Administrative Procedures Act,” Otting said.
He added that more than 90% of the comments his office received said the CRA lacks objectivity, fairness, and transparency.
Otting called the claim his proposal would permit redlining “blatantly false.”
“Nothing in this proposal changes the agency’s authority to enforce fair lending laws to prevent discrimination and redlining,” he said.
He also said claims his proposal would use a single metric to determine a bank’s CRA rating are false. Otting said his proposal requires examiners to use retail lending tests for each product. Examiners would then evaluate the impact of a banks' CRA activity by measuring the dollar value of that activity in each assessment and that overall bank.
Among the concerning aspects of the CRA to Waters is the ability of banks to receive CRA credit for financing sports stadiums. Otting said this practice has been a part of the legislation since 1993.
His current proposal doesn’t change that but noted the OCC is open to suggestions.
Waters, however, objected to this notion, saying sports stadiums located in opportunity zones come with little regard to how they impact low and moderate-income communities. She also questioned whether the Fed signed off on this proposal, to which Otting said no.
Otting, however, said later in the hearing that he has been engaged with the Fed “thousands of times” on this matter.
She said that Otting and his office “do not wish to work with us,” as members of the committee came to a board meeting to let their opposition to possible changes be known.
“You’ve decided you will work with no one. This is your proposal. This is what you want. This is what we get,” Waters said. “Forget about the Congress of the United States or anybody else—that you know better than anybody else.”
The latest proposal clarifies the approach of the bill and, for the first time since 1977, lists eligible investments that qualify for CRA credit.
Otting added his office will not extend the comment period to 120 days. He said the document was published on December 9, 2019, and will be closed on March 9, 2020—leaving it open for comment for 88 days.