Protect the Community Reinvestment Act

UPDATE: The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have extended the deadline for public comment to April 8.

The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation are proposing drastic changes to Community Reinvestment Act regulations that would weaken CRA’s ability to target funding to places that need it most. The changes would allow banks to claim CRA credit for lending that doesn’t actually benefit low-wealth communities. For example, a bank could get CRA credit for improvements to a major league stadium. 

The New York Times editorial board wrote, “The changes amount to a betrayal of the public interest for the benefit of banks.” And community development trade groups, including the National Community Reinvestment Coalition and Opportunity Finance Network argue the changes would:

• steer CRA credit to big, easy projects rather than smaller, more complex, high-impact local ones
• expand CRA credit to include volunteer activities that don’t necessarily benefit low-wealth people
• raise thresholds for defining small businesses and farms from $1 million to $2 million in assets
• minimize focus of bank branch locations in low- and moderate-income areas and stop reviewing branch openings and closings in specific communities
• stop recognition of targeted services and affordable products, low-cost transactions and checking accounts, and other services designed to expanded access to unbanked people

The CRA was implemented in 1977 in response to discriminatory practices, including redlining. It was intended to force banks to lend to borrowers of color and in low-wealth communities. While CRA has not reversed centuries of institutionalized racism, it has incentivized banks to invest nearly $2 trillion in places they previously ignored to the benefit of low-wealth homebuyers, small farms, entrepreneurs of color, nonprofit housing developers, local governments and community development financial institutions.

The Babcock Foundation invests in CDFIs as a proven way to alleviate poverty and build wealth in rural and unbanked places. MRBF listened to our community development finance partners' concerns about changes that could slow the progress the CRA has made over the last four decades. 

OCC and FDIC are accepting public comment on the proposed changes until March 9. MRBF shared our concerns this week. Opportunity Finance Network has posted a template and instructions for people who'd like to add their voices.