In Latest Filing, Organizations Serving Rural Indiana, the Deep South, California, and D.C. Detail Grave Harms Caused By Rollback of Community Reinvestment Act Protections
National Community Reinvestment Coalition, California Reinvestment Coalition Continue Legal Fight as Rollback Takes Effect October 1
Late Monday, the National Community Reinvestment Coalition (NCRC) and the California Reinvestment Coalition (CRC), represented by Democracy Forward and Farella Braun + Martel, responded to the Office of the Comptroller of the Currency’s (OCC) attempt to dismiss their suit challenging its dismantling of anti-redlining rules put in place to enforce the Community Reinvestment Act (CRA).
In May, OCC finalized new rules that — contrary to the CRA’s text and purpose to combat financial discrimination and facilitate access to capital in underserved communities — would dramatically reduce investment in low- and moderate-income communities. OCC’s gutting of critical protections afforded by the CRA was rushed through without the support of OCC’s institutional partners, the Federal Reserve and the Federal Deposit Insurance Corporation, which had, until this year, worked with OCC to administer the law. The rule was rushed out in the midst of the pandemic despite overwhelming opposition by commenters from community groups, financial institutions, and local governments. In their lawsuit, NCRC and CRC argue that the OCC’s new rule violates the Administrative Procedure Act because it was promulgated without sufficient data or analysis and without adequate consideration of stakeholders’ concerns about the proposal, among other flaws.
In this latest filing, NCRC and CRC — nonprofits founded to ensure underserved communities have access to capital and financial services — responded to OCC’s contention that they lack standing to sue.
In written declarations in support of the litigation, NCRC and CRC member organizations serving low- and moderate-income communities and communities of color explained how OCC’s unlawful changes will decimate their ability to carry out their work to empower underserved communities.
Set to take effect October 1, OCC’s new rule will:
- Allow banks to “comply” with the CRA while engaging in activities that do little for the underserved communities the Act seeks to protect.
- As William J. Bynum, the CEO of Hope Credit Union — a Black-owned credit union providing financial services to people in economically distressed parts of Alabama, Arkansas, Louisiana, Mississippi, and Tennessee — stated in a written declaration, the rollback “threatens our ability to meet the credit and depositary needs of our communities” by “deprioritiz[ing] meaningful CRA activities in the distressed communities we serve and encourag[ing] larger, easier activities.”
- Permit banks to ignore a large number of communities they do business in and still receive a “passing” grade.
- As Marie Morse, Executive Director of HomesteadCS — which provides education and resources to increase affordable, sustainable housing opportunities and financial stability in rural Indiana — explained, “The fact that banks can now ignore our areas altogether without precluding themselves from obtaining an Outstanding rating puts us at a substantial risk of losing future funding opportunities.”
- Without such funding, Morse stated, “we would not be able to offer our lending program, develop affordable housing units, or provide our education and counseling services.”
- Privilege high-dollar projects at the expense of targeted lending and investments in low- and moderate-income communities.
- Jim Dickerson, Founder and CEO of MANNA — which renovates and sells homes to formerly homeless families in Washington, D.C. — stated “would possibly allow banks to receive CRA credit for large infrastructure projects such as the expected relocation of the stadium where Washington’s professional football team plays … significantly diminish[ing] CRA funds which are sorely needed for lower-income people and communities.”
- Eviscerate the services test, reducing oversight of branch openings and closings, which will have a huge impact on bank presence and small business lending in rural communities.
- As Tate Hill, Executive Director of Access Plus Capital — a mission-driven small business loan fund in Fresno that has provided more than $35 million in loans to businesses 14 largely rural and highly underserved counties in the Central Valley — explained, “Typically, banks give us an investment loan that we then use to lend to our clients. Banks are often explicit that their investments are tied to their CRA obligations. They will approach us with particular targets they want to hit in particular areas. … If banks can ignore their assessment areas in our counties, or remove their branches but continue extracting deposits without incurring CRA obligations, the challenges we face will grow and our ability to meet our communities’ needs will suffer.”
Read all the declarations — including two submitted by the East Bay Housing Organizations and Richmond Neighborhood Housing Services — filed in support of the litigation here.
Last week, the Federal Reserve began its own rulemaking process to update its Community Reinvestment Act regulations.
In June, the U.S. House of Representatives passed a Congressional Review Act resolution of disapproval to overturn OCC’s unlawful rollback of the anti-redlining rules.
The plaintiff’s opposition to the defendants’ motion to dismiss the suit was filed on September 28. Read it here. NCRC and CRC sued OCC on June 25 in the U.S. District Court for the Northern District of California. Read the original complaint in full here.
Magistrate Judge Kandis A. Westmore plans to hold a hearing on the motion on November 5, 2020.
Democracy Forward is a nonprofit legal organization that scrutinizes Executive Branch activity across policy areas, represents clients in litigation to challenge unlawful actions, and educates the public when the White House or federal agencies break the law.
National Community Reinvestment Coalition and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business. NCRC was formed in 1990 by national, regional and local organizations to increase the flow of private capital into traditionally underserved communities. NCRC has grown into an association of more than 600 community-based organizations in 42 states that promote access to basic banking services, affordable housing, entrepreneurship, job creation and vibrant communities for America’s working families.
The California Reinvestment Coalition (CRC) is the largest statewide community reinvestment coalition in the country, with over 300 member organizations across California that provide services to tens of thousands of low- income residents. CRC members include affordable housing developers, community development financial institutions, housing counseling agencies, small business technical assistance providers, legal services agencies, and community-based organizations.
Farella Braun + Martel is a leading Northern California law firm representing corporate and private clients in sophisticated business transactions and complex commercial, civil and criminal litigation. Clients seek our imaginative legal solutions and the dynamism and intellectual creativity of our lawyers. We are headquartered in San Francisco and maintain offices in the Napa Valley that are focused on the wine industry.
California Reinvestment Coalition
Farella Braun + Martel LLP