On September 8, 2021, the Office of the Comptroller of Currency (OCC) formally issued a proposal to rescind a controversial rule within the Community Reinvestment Act (CRA) that the OCC published in June 2020. The CRA, enacted in 1977, requires the Federal Reserve along with other banking regulators to encourage financial institutions to meet the credit needs of communities they do business with, including low- to middle-income neighborhoods.
Instead, the agency is proposing to replace the anti-redlining rule with rules adopted jointly by the OCC, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) in 1995. The proposed rules are meant to collate CRA rules with the current Board of Governors of the Federal Reserve System and FDIC rules. According to the OCC, this rule will “facilitate the on-going interagency work to modernize the CRA regulatory framework and create consistency for all insured depository institutions.”
The OCC’s final rule issued in 2020 was intended to modernize the regulatory framework implementing the CRA. It was also meant to update deposit-based assessment areas; mandate the inclusion of consumer loans in CRA evaluations; include quantitative metric-based benchmarks for determining a bank’s CRA rating; and include a non-exhaustive illustrative list of activities that qualify for CRA consideration.
Earlier this summer, Acting Comptroller of the Currency Michael Hsu signaled that he would rescind the 2020 changes and pursue a joint rulemaking to modernize the CRA with the other national banks.
“To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized,” said Acting Comptroller Hsu. “The disproportionate impacts of the pandemic on low and moderate income communities, the comments provided on the Board's Advanced Notice of Proposed Rulemaking, and our experience with implementation of the 2020 rule have highlighted the criticality of strengthening the CRA jointly with the Board and FDIC.”
Hsu also admitted that the 2020 rescinded rule was a “false start” on modernizing the CRA. “This is why we will propose rescinding it and facilitating an orderly transition to a new rule,” Hsu said. “I look forward to working with the other agencies to develop a joint Notice of Proposed Rulemaking and building on the ANPR proposed by the Board in September 2020.”
The newly proposed rule(s) will apply to all national banks as well as all federal and state savings associations. The OCC is soliciting public commentary, due by Oct. 29.
