Potential Changes to the Enforcement of the Community Reinvestment Act

The Community Reinvestment Act (“CRA”), enacted in 1977, has not been substantially revisited since the Clinton administration in 1995. The CRA not only outlaws redlining practices, but also requires lenders to make loans to those communities within their geographical footprint as defined by branch locations.

In April, Joseph Otting, the Comptroller of the Currency, announced at the Bankers Association's Government Relations Summit that the OCC’s top policy priorities are changing regulations on the CRA, the Bank Secrecy Act and small-dollar lending. 

 According to Otting, the agency is looking to:

  • Improve how it measures CRA performance;
  • Create simpler methods of verifying compliance; and
  • Develop a broader definition of what qualifies for a CRA credit. 

On April 3, 2018, the U.S. Department of Treasury released recommendations to modernize the CRA.  The recommendations were directed towards other federal banking regulatory agencies that will jointly issue new guidance.  The Treasury’s recommendations include:

  • Update the definitions of geographic assessment areas to reflect the evolving banking environment that is affected by developments in technology, customer behavior and other factors. The current law, which only looks at lending at a bank’s physical location, does not consider changes in banking such as online lending and consumer behaviors;
  • Increase clarity and flexibility of CRA examinations to increase transparency and effectiveness of CRA rating determinations;
  • Improve the examination process to ensure timeliness of evaluations and expand accountability for banks planning CRA activity; and
  • Incorporate performance incentives to promote the CRA’s original purpose of encouraging banks to meet the credit and deposit needs of their communities. 

The federal banking agencies are expected to issue an advance notice of proposed rulemaking in the near future seeking the public’s input on potential changes to CRA regulations.