Lilly Thomas: The state of CRA modernization

Rep. Gregory Meeks (D-N.Y.), and Joseph Otting of the Office of the Comptroller of the Currency (OCC)
Rep. Gregory Meeks (D-N.Y.), right, speaks while Joseph Otting of the Office of the Comptroller of the Currency (OCC) listens during Otting’s nationwide bus tour to sell his vision of the CRA. Photo: Victor J. Blue/Bloomberg via Getty Images

The current requirements of the Community Reinvestment Act do not fit the needs of community banks today. ICBA makes its case.

By Lilly Thomas, ICBA

After more than two decades without change, the Community Reinvestment Act (CRA) is poised for modernization—but what those changes will look like is still up for debate.

ICBA has pushed for updates to CRA for years, advocating for community banks that find the CRA exam process inconsistent and unclear. Among the most commonly cited issues is the fact that CRA credit for loans and services can vary from exam to exam, making it difficult for community banks to plan and implement their CRA requirements. Community banks have been clamoring for regulatory guidance that details documentation and recordkeeping requirements.

Community banks have been clamoring for regulatory guidance that details documentation and recordkeeping requirements.

The rules are also outdated, reflecting a pre-internet, pre-mobile banking landscape where assessment areas could be easily defined by branch locations.

The primary banking regulators agree that change is needed, but they aren’t in agreement on what those changes should look like.

OCC and Fed diverge on CRA

The Office of the Comptroller of the Currency (OCC) has been leading the push for CRA modernization. It teamed up with the FDIC to publish proposed rules in December 2019. The proposed rules include a number of ICBA-supported provisions, including:

  • Modernizing the definition of small business loans
  • Promoting lending to family farms
  • Providing a list of preapproved CRA activities to help promote fair, equitable, consistent and transparent implementation of the law

The proposal also includes an ICBA-advocated provision allowing small community banks to opt into the revised framework to avoid a one-size-fits-all approach.

The OCC and FDIC proposal is long and complex, coming in at 240 pages. As of press time, ICBA was still gathering input from community bank members to assess how the proposal will affect their ability to meet the needs of their communities, including low- and moderate-income individuals. CRA reform is a longtime community bank priority, since the CRA mission of maximizing the availability of financial services and credit in local communities is the essence of community banking.

The agencies are also gathering public comment on the proposal. It has raised eyebrows for its short comment period: 60 days, compared with the usual 90. ICBA is among many groups that have asked for this to be extended. More time would help ICBA analyze the proposal to understand its full impact and collect in-depth feedback on the proposal from community bankers.

The agencies also caught the attention of the House Financial Services Committee. Six panel members, including chairwoman Maxine Waters (D-Calif.), attended the FDIC’s public announcement of the proposal—an unusual move in a town where lawmakers typically write the laws and regulators are free to implement them as they see fit.

It’s also surprising to see the OCC and FDIC issuing a CRA rule without the involvement of the Federal Reserve, creating a situation where banks with different regulators could end up following very different CRA rules.

The Fed’s CRA view

While the Federal Reserve has yet to release a proposal, it has clear ideas of its own, according to a speech from Federal Reserve governor Lael Brainard. The Fed says it has engaged in extensive CRA data analysis and argued that CRA would be best served by measuring the number of loans instead of the size of them.

“Any modernization of the Community Reinvestment Act must further the goal at the heart of the statute—encouraging banks to meet the credit needs of local low- and moderate-income communities,” the Fed said in a statement after the release of the OCC and FDIC proposal. “No decisions have been made about how the Federal Reserve will proceed.”

The agencies all agree that the best outcome is working together to develop a single CRA modernization initiative, resulting in one set of regulations that apply across all the regulatory agencies. ICBA strongly encourages participation by all banking regulators, including the Federal Reserve, to create one rule. Otherwise, banks in the same community could be subject to different CRA frameworks and examination rules.

Regardless of how CRA shakes out among the Fed, OCC and FDIC, credit unions will be exempt from CRA. The National Credit Union Administration doesn’t have the power to enact CRA for credit unions. Only Congress can do that. ICBA supports applying comparable CRA requirements to credit unions and will continue to advocate for a level playing field where credit unions and nonbank lenders are subject to the same CRA requirements.

In the meantime, ICBA appreciates the thoughtful consideration of the OCC and FDIC in reviewing comments and hopes to see a final rule that provides CRA clarity, consistency and transparency.

How you can help

Comment on the OCC and FDIC’s CRA proposal at Comment period ends March 9.

Keep up to date on this and other issues at

Lilly Thomas is ICBA executive vice president and senior regulatory counsel