Issued less than 14 months ago, the OCC is poised to rescind its 2020 CRA rule and commence a joint modernization effort.
The Office of the Comptroller of the Currency has announced it will propose rescinding the Community Reinvestment Act (CRA) rule issued in May 2020 and is committed to working with the Federal Reserve Board and Federal Deposit Insurance Corporation to put forward a joint rulemaking that strengthens and modernizes the CRA. The 2020 final rule was intended to clarify and expand the bank lending, investment, and services that qualify for positive CRA consideration; update how banks delineate the assessment areas in which they are evaluated; provide additional methods for evaluating CRA performance in a consistent and objective manner; and require reporting that is timely and transparent (see Banking and Finance Law Daily, May 20, 2020).
The OCC’s decision to begin the regulatory process to rescind the final rule follows the completion of a review initiated by Acting Comptroller of the Currency Michael Hsu shortly after he took office (see Banking and Finance Law Daily, May 19, 2021). The decision culminates 14 months of legislative maneuvers, other regulatory initiatives, and stakeholder feedback.
Response to 2020 final rule. The 2020 final rule was met with both partisan political responses, as well as mixed reactions by financial industry groups due, in part, to the OCC’s failure to win sign-on from other federal regulators (see Banking and Finance Law Daily, May 21, 2020). Shortly after the final rule was published in the Federal Register, House Financial Services Committee Chairwoman Maxine Waters (D-Calif) and committee member Rep. Gregory Meeks (D-NY) introduced a resolution to repeal the final rule under the Congressional review Act (see Banking and Finance Law Daily, July 12, 2020). Then-Acting Comptroller of the Currency Brian Brooks called the resolution "horribly misguided" and added that a repeal of the final rule would "prevent future Comptrollers from taking up the rule to improve how CRA works in the future" (see Banking and Finance Law Daily, July 20, 2020).
In September 2020, the Fed approved an Advance Notice of Proposed Rulemaking (ANPR) that sought public comment on an approach to modernize its CRA regulations. The Fed last revised its CRA regulations about 25 years ago. The Fed noted that the ANPR would seek to provide a foundation for the Fed, OCC, and FDIC to converge on a consistent approach to modernize their CRA frameworks that has the broad support of stakeholders. Among other things, the Fed’s ANPR sought feedback on ways to evaluate how banks meet the needs of low- and moderate-income (LMI) communities and address inequities in credit access; and the use of a metrics-based approach to respond to calls for greater certainty regarding how banks are assessed and rated (see Banking and Finance Law Daily, Sept. 21, 2020).
Finally, in early May 2021, a diverse group of trade associations had requested that the OCC formally withdraw or delay the compliance date for at least two years. The trade associations cited media reports that a new Comptroller of the Currency would revise the final rule and the trade associations sought to avoid "significant expenditures that will be wasteful if the OCC significantly modifies the Rule as part of a future interagency rulemaking" (see Banking and Finance Law Daily, May 5, 2021).
False start. In making the announcement, Acting Comptroller of the Currency Hsu said, "To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized." He added, "The disproportionate impacts of the pandemic on low and moderate income communities, the comments provided on the Board's Advanced Notice of Proposed Rulemaking, and our experience with implementation of the 2020 rule have highlighted the criticality of strengthening the CRA jointly with the Board and FDIC. While the OCC deserves credit for taking action to modernize the CRA through adoption of the 2020 rule, upon review I believe it was a false start. This is why we will propose rescinding it and facilitating an orderly transition to a new rule. I look forward to working with the other agencies to develop a joint Notice of Proposed Rulemaking and building on the ANPR proposed by the Board in September 2020."
Consistent, modernized framework. The three banking agencies also released a joint statement which said that they "are committed to working together to jointly strengthen and modernize regulations implementing the [CRA]." The statement added, "Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods." In a separate statement, Fed Governor Lael Brainard said, "We are delighted to work together to develop a joint Notice of Proposed Rulemaking building on the Board's September 2020 Advance Notice of Proposed Rulemaking, which was intended to provide a framework for a joint rulemaking that ensures the CRA remains a strong and effective tool to address inequities in access to credit and meet the needs of low- and moderate-income communities and garners broad support."
Reaction. Following the OCC’s announcement, Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said, "The Community Reinvestment Act (CRA) rule rushed through by former Comptroller Otting did not fulfill the core purpose of CRA—to ensure banks are serving low-income communities and communities of color. I applaud Acting Comptroller Hsu for rescinding this misguided rule, and I’m glad that all three bank regulators are finally at the table, listening to feedback, and developing a proposal that will make sure banks are serving everyone.’
Jesse Van Tol, CEO of the National Community Reinvestment Coalition stated, "This is great news and a big deal for lower-income communities and people of color who have suffered for decades from lending discrimination and underinvestment in entire neighborhoods, and also for community advocates and banks that have struggled with outdated and confusing rules." He added, "It’s great to see the three banking agencies that should work together on CRA rules and enforcement finally committing to do so."
Rob Nichols, President and CEO of the American Bankers Association noted, "By proposing to rescind the OCC's 2020 rule and announcing a commitment to develop a joint rulemaking involving all of the banking regulators, there is a new opportunity to craft a single set of rules for banks to follow. We look forward to working with the agencies and other stakeholders to achieve our shared goals of increasing investment and economic opportunity in neighborhoods across the nation."
Finally, Richard Hunt President and CEO of the Consumer Bankers Association said, "It is well past time for federal regulators to finally demonstrate responsible government by modernizing CRA for the first time in over two decades. Any modernized CRA rule should be transparent, flexible and consistent across regulators to ensure banks are able to optimize support for the communities they serve." Hunt added, "We once again commend the OCC for bringing this issue to the forefront in an effort to modernize this antiquated law, and we look forward to working collaboratively with the OCC, FDIC, and Federal Reserve to modernize the CRA through a joint rulemaking."
Companies: American Bankers Association; Consumer Bankers Association; National Community Reinvestment Coalition
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