OCC Issues Manual on Impact of Discriminatory, Illegal Credit Practices on CRA Ratings

October 20, 2017

On Friday, October 20, 2017, the OCC issued a Bank Supervision Policies and Procedures Manual (PPM 5000-43) on Impact of Evidence of Discriminatory or other Illegal Credit Practices on Community Reinvestment Act Ratings. The PPM addresses the considerations the OCC will take to address “compliance downgrades” on CRA performance evaluations in the future.  The PPM sets forth two principles that will guide the OCC in this matter:


  1. There must be a logical nexus between the assigned rating(s) and evidence of discriminatory or other illegal credit practices in the bank’s CRA lending activities to ensure alignment between the rating(s) and the bank’s actual CRA performance.  As noted in the PPM, “A downgrade of the composite rating should be supported by strong evidence of quantitatively and qualitatively material instances of discriminatory or illegal credit practices directly related to CRA lending activities that have resulted in material harm to customers.”
  2. Full consideration is given to the remedial actions taken by the bank. “This principle ensures that the CRA rating does not penalize a bank for compliance deficiencies or illegal credit practices that have been, or are substantially being, addressed by the bank because such penalties unnecessarily distract and divert the bank’s resources from lending, investing, or serving the relevant communities and thereby frustrate the CRA’s purposes.”


The PPM also states, among other things:

  • Controls, testing or audit procedures that the bank has implemented, and restitution made to customers, may be mitigating considerations. For example, a lower rating may not be warranted if a bank self-identifies violations and voluntarily takes corrective actions in a timely manner; and
  • If a rating is lowered, examiners must provide a full explanation in the PE as to why the discriminatory or other illegal credit practice(s) resulted in a lower rating. This explanation must include a description of how the policies contained in this PPM were applied.