Late last week the Office of the Comptroller of the Currency (OCC) released a “Policies and Procedures manual on the Community Reinvestment Act (CRA). In part, the manual outlines when a OCC-regulated bank will receive a performance downgrade due to discriminatory or illegal credit practices.
The CRA was enacted in 1977 by then-president Jimmy Carter, but has since been revised in May 1995 and then updated in August 2017. According to FederalReserve.gov:
“The law requires each depository institution’s record in helping meet the credit needs of its entire community be evaluated by the appropriate Federal financial supervisory agency periodically.
According to statement released by Bryan Hubbard, Deputy Comptroller for Public Affairs, the changes to policy “ensure a logical nexus between our CRA performance evaluation ratings and banks’ CRA-related activities.” He goes on to say the revisions give full consideration to the corrective actions that are taken by banks during the evaluation.”The revised policy ties a CRA rating, and any downgrade, to CRA lending activities so that banks have incentive to improve their CRA activity and are held accountable for any discriminatory or other illegal credit practices related to their CRA activities. These changes keep the purpose of the CRA in mind when we seek to correct certain banking behavior or improve a bank’s CRA performance.
Ranking Member of the Committee on Financial Services Congresswoman Maxine Waters (D-CA) issued a statement in response, saying, “By easing the consequences for banks that violate fair lending laws, these new guidelines show Mr. Noreika is putting Wall Street first and directly contradict the OCC’s mission to ensure that national banks treat customers fairly and comply with applicable laws and regulations.”
A blog posted on FinRegReform.com title “OCC Brings Common Sense to CRA Ratings” however makes the case for the changes. Authored by attorneys Randall D. Guynn, Margaret E. Tahyar, Christopher M. Paridon, and Jennifer E. Kerslake, the authors state:
“The OCC’s recent revision to its Community Reinvestment Act examination and ratings policies is a welcome first step in a long overdue and much needed rethink of how supervisors might modernize the CRA so that the statutory goal of helping underbanked communities can be met in the digital era. Tailoring CRA examinations to the original intent of the statute should help regulators finish CRA examinations more quickly. It should eliminate the multi-year delays in issuing CRA ratings that have been experienced in recent years."