The Treasury Department, in a memo released Tuesday, said the 1977 Community Reinvestment Act hasn’t kept pace with the evolving banking sector. The law, which was passed to stop “redlining,” a form of lending discrimination, is enforced by a complicated series of regulations. Treasury Secretary Steven Mnuchin and Comptroller of the Currency Joseph Otting, who both dealt with the law as executives at OneWest Bank, now a part of CIT Group Inc., have said altering the rules is a priority.
Proposed changes could free banks from some costly commitments they have had to make under the current CRA regime. For instance, banks often keep many branches open in poorer neighborhoods to get a good grade on the exam, even though these branches are far less lucrative than those in richer neighborhoods.
