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CBA Welcomes CRA Modernization, Prepares Recommendations to Promote, Not Curtail, CRA Activity
The Consumer Bankers Association this Friday will submit recommendations for modernizing the Community Reinvestment Act (CRA), a law enacted in 1977 to ensure banks continued serving the financial needs of their communities. The submission follows a Notice of Proposed Rulemaking (NPR) issued in May by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Why It Matters: Since the CRA was enacted more than 40 years ago, banks have invested trillions of dollars into underserved communities, making the vision of CRA a reality for families and small business most in need. While the banking industry has evolved dramatically during that time – from the widespread adoption of smartphones and mobile banking to the growth of fintechs offering traditional bank products – the law has largely remained untouched since the last modernization effort in 1995. Modernizing the CRA is critical to reflecting the modern-day banking landscape and leveraging the innovative capabilities of financial institutions to optimize investments and reach more people and communities in need.
What CBA Is Saying: America’s leading banks are fully committed to expanding access to credit among underserved communities and annually invest more than $500 billion to support those most in need. In May, following the release of the NPR, CBA wrote, “we’re pleased to see the proposal focus on providing banks with the clarity, consistency, and transparency necessary to continue delivering on CRA’s important mission for years to come. We also commend leading regulators for taking a unified approach and incorporating feedback from all stakeholders. […] CBA, our Community Reinvestment Committee and all our member banks […] look forward to working with regulators, providing recommendations critical to ensuring the success of this effort.”
Since, May, CBA’s CRA Working Group, consisting of top CRA officers, attorneys, and policy personnel from our member banks, has worked diligently to analyze and provide comments to the nearly 700-page proposed rule. The group has met consistently on a weekly basis (and sometimes more) to ensure the industry has successfully highlighted opportunities and addressed concerns to strengthen the proposal.
What CBA Is Recommending: Modernizing CRA is important, but it will take time and flexibility to get it right. That’s why CBA has called on regulators to ensure provisions in the final rule do not hamper CRA activity; encourage even more lending to low- to moderate-income consumers; and are practical to implement. Specifically, among the many recommendations CBA will outline in its letter tomorrow, CBA will urge regulators to strongly consider:
Providing a longer implementation timeframe of at least 24 months to ensure banks can navigate the complex changes, come into compliance, and continue to successfully optimize support for the communities they serve.
Helping low- to moderate-income individuals build wealth by excluding auto loans and instead refocusing the CRA on mortgage loans and small business loans, which are instrumental to achieving that goal.
Ensuring continued flexibility for banks to determine how best to serve their communities and in ways consistent with their business orientations, recognizing banks require flexibility to address different needs and issues across different markets.
Expanding community development categories, rather than a restriction, which will complicate banks’ efforts to meet the unique and varying needs of each community they serve.
Examining each bank on its facility-based assessment area and institution-wide performances, rather than using Retail Lending Assessment Areas, which will not accurately measure a bank’s CRA activity and could adversely affect a bank’s ability to support communities most in need.
The Bottom Line: These recommendations are intended to deliver a final CRA rule that provides banks more clarity as to which investments will count – allowing for them to do more, not less. They will also help ensure CRA investments reach those communities most in need and further our shared objective of financing the American Dream across every community our members serve today – and for decades to come.
Dive Deeper: To learn more about CBA’s advocacy efforts to modernize the Community Reinvestment Act, click here.