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OCC seeks comment on modernizing CRA regulatory framework

The Office of the Comptroller of the Currency (OCC) has issued an advance notice of proposed rulemaking (ANPR) on which it invites public comment “to solicit ideas for building a new framework to transform or on ways to transform or modernize the regulations that implement the Community Reinvestment Act of 1977 (CRA).”  The ANPR follows the Treasury Department’s issuance of a memorandum in April 2018 that made recommendations for modernizing the CRA to reflect the significant organizational and technological change experienced by the U.S. banking industry since the CRA’s enactment.  The Treasury’s memorandum was directed to the primary CRA regulators, consisting of the OCC, the Federal Reserve, and the FDIC.  Each of these agencies has individually adopted regulations to implement the CRA.  In issuing the ANPR, the OCC becomes the first of the three agencies to move forward on updating its CRA regulations.  Comments on the ANPR will be due no later than 75 days after the date it is published in the Federal Register.

The ANPR is intended to respond to stakeholder concerns that (1) the CRA’s statutory purpose of encouraging banks, consistent with safety and soundness considerations, to help meet the credit needs of the communities they serve including low- and moderate-income (LMI) areas “is not fully or effectively accomplished through the current regulations,” (2) the current CRA regulatory framework “no longer reflects how many banks and consumers engage in business of banking,” and (3) the current CRA regulatory requirements lack “clarity, consistency, and certainty.”

Following a discussion of the different methods currently used to evaluate a bank’s CRA performance depending on its asset size and business strategy, what is included in a bank’s assessment area, and the relationship between a bank’s assessment area and its CRA-qualifying activities, the ANPR invites comments on five groups of questions.  The questions in the first group are general in nature and solicit comments “on changes to transform or modernize the current CRA regulatory framework.”  For example, the OCC asks whether the current CRA regulations are “clear and easy to understand” and “applied consistently” and whether the current CRA rating system is “objective, fair, and transparent.”

The other four groups of questions are directed at specific topics as follows:

  • Revising or transforming the current regulatory approach by implementing either (1) an alternative evaluation method to replace existing performance tests and standards that would “separately evaluate retail or [community development (CD)] activities for all banks, accounting for variations in size, business model, or other factors,” and use “updated metrics that take into account information on a bank’s performance context, such as the demographic characteristics and the economic and financial condition of specific communities,” or (2) “a more transformational approach” that could, through the use of “a metric-based performance measurement system with thresholds or ranges (benchmarks) that correspond to the four statutory CRA ratings,” make the process for evaluating a bank’s CRA performance more transparent, define “community” more broadly, and expand the activities receiving CRA consideration.

  • An updated approach to defining a bank’s assessment area under which a bank would continue to receive consideration for CRA-qualifying activities within its branch and deposit-taking ATM footprint and could receive consideration “for providing these types of beneficial activities in LMI areas outside of [such footprint] and other underserved areas.”

  • Expanding CRA-qualifying activities through regulatory changes “that could ensure CRA consideration for a broad range of activities supporting community and economic development in banks’ CRA performance evaluations, while retaining a focus on LMI populations and areas, and set clear standards for determining whether an activity qualifies for CRA consideration,” such as small business loans.

  • Updating CRA recordkeeping and reporting requirements under a metric-based framework.

The ANPR concludes with an invitation for “other ideas and options for modernizing the CRA regulatory framework not identified in this ANPR.”

Copyright © by Ballard Spahr LLP

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About this Author

Barbara S. Mishkin, Ballard Spahr, Philadelphia, Deceptive Practices Lawyer, Fair Debt Collection Practices Act, Gramm Leach Bliley
Of Counsel

Barbara Mishkin focuses on consumer compliance and banking law. The federal laws with which Ms. Mishkin has dealt extensively include the Truth in Lending Act, Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, and Gramm-Leach-Bliley Act. She also has significant experience with state usury and lender licensing laws, as well as state laws prohibiting unfair and deceptive acts and practices.

American Bar Association, member, Consumer Financial Services Committee;...

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