NCRC statement on Federal Reserve vote to update CRA rules

Today, the Federal Reserve Board of Governors approved a process to revise the rules banks must follow to comply with the Community Reinvestment Act (CRA), and an Advanced Notice of Proposed Rulemaking to begin that process.

Jesse Van Tol, CEO of the National Community Reinvestment Coalition, made the following statement:

“This is an encouraging step toward thoughtful updates to CRA rules, which are essential to ensure loans and investments from banks reach underserved minority and lower-income communities that have been especially hard hit by the coronavirus pandemic.

“Unlike the OCC, which earlier this year enacted an unworkable update to its CRA rules, the Fed has focused on transparent data analysis and qualitative measures of impact on communities, rather than on simplistic formulas that are easy to manipulate. We’ll need to look carefully at the details, and there may be significant differences in what we want to see in the rules compared to what banks want or what the Fed ultimately proposes. But it’s clear at this point that the Fed is listening carefully to stakeholders and aiming for new rules that could be a model for a uniform approach by all the banking agencies. That’s really what we need.

“We need big improvements to the CRA regulations, and I see this as an honest first step in that direction. Congress should also look at expanding the law beyond banks. I look forward to working on this update collaboratively with the Fed and its CRA team led by Gov. Brainard, and with bankers who also have legitimate reasons to want to see the rules updated and made clearer for everyone, including for community leaders and advocates.

“CRA requires lending in communities that suffered intentional and explicit exclusion from banking services in the past, through a government-sanctioned system known as redlining. CRA was enacted in 1977 to put an end to redlining and to ensure lenders served all communities where they took deposits. CRA led to more than $4 trillion trillion in bank lending, investments and philanthropy in underserved communities since 1996. But the rules and the law itself need to be modernized and strengthened to reflect modern banking practices and a digital economy, and also to more fully serve communities where the volume of housing and small business loans is still inadequate despite a half century of fair lending laws. Neighborhoods that were redlined in the 20th Century are still poorer, and now they are disproportionately suffering and at greater risk from COVID-19. There’s a link between lending and housing discrimination in the past and today’s patterns of poverty and disinvestment.

“CRA is an important tool to ensure private capital reaches all communities, not just the rich ones. It’s an essential mechanism to address racial, socio-economic and geographic wealth divides that have been made more visible because of the disproportionate suffering from COVID-19, and through Black Lives Matter protests across the nation. Those protests are a response not only to police brutality but to fundamental social and economic inequality. CRA was supposed to require equality in access to financial services that are foundational to community and individual well-being. The stakes are tremendous, and a new approach to CRA could be transformational for the entire nation.”

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