WASHINGTON — The Office of the Comptroller of the Currency issued more than 30 questions Tuesday asking the public how it can revamp a 40-year-old law that grades banks on their lending to low- and moderate-income communities.
The questions are included as part of an advance notice of proposed rulemaking as the OCC begins the process of modernizing the Community Reinvestment Act of 1977 with the hope that other bank regulators will join later.
“I really believe this ANPR starts the process of that discussion of how we can bring more [lending] to those communities across America,” Comptroller Joseph Otting said during a call with reporters. “The longer we wait on an ANPR is just the longer that those communities will be underserved and not have the hope that we can assist them in those respected communities.”
Some of the key questions look at how so-called community assessment areas should be redefined, as the law was originally written to primarily look at areas where a bank is headquartered or has physical branches. This has become a greater challenge as there are rural areas in need of loans but have no bank branches, and online banking has expanded but does not count toward CRA credit.
“Banks have a continuing responsibility to meet the credit needs of their communities, but in recent years banking has seen major changes,” Richard Hunt, president and chief executive of the Consumer Bankers Association, said in a statement. “Recognizing those changes and bringing CRA into the 21st Century will ensure community investment dollars are put to work where they are most needed.”
Otting has also repeatedly pushed to expand the types of loans that would get CRA credit, including, for example, certain business loans that would be aimed at increasing job growth in a community. He suggested perhaps lifting a CRA restriction on lending through religious organizations.
“I understand the difference between church and state but I think we should be able to clearly delineate those activities at a church because in a lot of the Latino and black communities across America, they go to the church for not only their religion but also often their financial literacy counseling, their home mortgage,” he said. “We should support those activities that allow financial institutions to support that and be able to get CRA credit.”
Yet some community groups have raised concerns that expanding the types of loans or assessment areas included under the law would simply make it easier for banks to get CRA credit rather than placing a greater focus on areas that need loans the most. This debate is likely to be an area of focus for public comment in response to the ANPR.
"Banks and consumer groups agree that the law needs to be uniformly implemented. The rules need to be clear. That means all of the agencies that set rules for CRA enforcement, including the FDIC and the Federal Reserve, need to work together on a common framework," Jesse Van Tol, chief executive of the National Community Reinvestment Coalition, said in a statement. "That framework should place at its core improving access to capital, credit and basic banking services for low- and moderate-income people, and in communities of color.”
The OCC's release also asks a number of questions about how to make the CRA performance tests more clear so banks know exactly what types of loans and assessment areas get CRA credit. This includes the possibility of creating a new metrics-based measurement system that the OCC said would be more “quantitative” with thresholds or benchmarks.
“This approach would allow flexibility to accommodate bank capacity and business models while facilitating the comparison among banks of all sizes and business models and the evaluation against an objective, transparent threshold,” the agency said in the ANPR.
The comment period will be open for 75 days after the ANPR is published in the Federal Register. Otting said the OCC will need about 75 to 100 days after that to go through the comments and share them with other regulators before proposing a rulemaking notice, which would also have a 75-day comment period. That means a final rulemaking process will not go out until the summer of next year at the earliest.
“It’s realistic to assume that this process probably takes about a year to bring to conclusion,” the comptroller said. “If we can do that, I think it will be something that I would be very proud of” and “really drives the reason to which I take this on as a personal challenge to see what we can do to make this better for all Americans.”
