Today, the Office of the Comptroller of the Currency (OCC) proposed to fully rescind its 2020 Community Reinvestment Act (CRA) rule, revert to previous rules, and then work on new rules jointly with the two other agencies that enforce the law, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC).
In response to the OCC’s previous announcement of its intent to rescind the rule, two public-interest groups agreed, on September 2, 2021, to a 90-day pause in the lawsuit they filed to overturn the 2020 rule.
Last year, the National Community Reinvestment Coalition (NCRC) and the California Reinvestment Coalition (CRC), represented by Democracy Forward and Farella Braun + Martel, filed a lawsuit seeking to vacate the OCC’s CRA rule, claiming that it violated the Administrative Procedure Act and was finalized without sufficient data to support the revisions. In February 2020, a federal judge rejected the OCC’s attempt to dismiss the lawsuit, a key hurdle in moving the claim forward.
In May of this year, the OCC announced that it would halt further implementation of portions of the harmful rule that had not yet been implemented, including how banks would be evaluated under new exams and additional data reporting requirements. But other provisions that were already finalized by the OCC, including the designation of activities eligible for credit under the CRA, remained in effect. For example, the 2020 rules allowed banks to get CRA credit for large infrastructure projects, like major bridges, that might do little to improve community or economic development or address needs in low- and moderate-income communities.
The proposal today dealt with some transition issues such as activities that counted under the partial implementation of the 2020 rule. A bank should not be penalized for engaging in an activity permitted by its regulatory agency at the time the bank undertook it; however, the OCC should rescind its changes to the definition of community development as quickly as possible and revert to the 1995 definitions until those are replaced by a new interagency rule.
Today’s proposal from the OCC, with public comments due October 29, would not only fully rescind the 2020 CRA rule but also restated the agency’s intent to draft new rules jointly with the Federal Reserve Board and FDIC. The timing for those new rules wasn’t spelled out in today’s proposal.
The OCC action today followed the appointment of Michael Hsu as Acting Comptroller in May.
“Today’s announcement is an important step to create an updated CRA that increases, rather than decreases, financial services, lending, and investment in low- and moderate-income communities,” said Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition. “The 2020 rule was an administrative fiasco and a disgraceful attempt to water down enforcement of a law that’s critical to ensuring banks meet the needs of all communities. It would have produced disastrous outcomes for lower-income communities that are still suffering from the economic and personal devastation of the pandemic. We need to leave behind the Trump administration’s callous approach to equity.
“I’m encouraged by Acting Comptroller Hsu’s leadership to move forward toward stronger and clearer CRA rules that reflect the modern lending landscape and to meaningfully address the lingering and pervasive inequities in access to credit and capital that need to be driven out of the economy once and for all. We’ve paused the lawsuit to give the OCC time to work with the FDIC and Federal Reserve Board on a joint proposed rule and schedule for issuing the rule.”
“Today, Black, Indigenous, People of Color, as well as organizers who have fought back against this harmful rule, can rejoice in this milestone victory,” said Paulina Gonzalez-Brito, CEO of the California Reinvestment Coalition. “CRC and our members are proud to have helped secure this win that does away with the Trump administration rule steeped in white supremacy that would have dismantled the nation’s anti-redlining law. We look forward to working with the Biden Administration to ensure that a new, just, and race-conscious rule is put in place.”
“Today’s announcement is an important milestone,” said Democracy Forward Managing Senior Counsel Jeffrey Dubner. “The Trump-era CRA rule unlawfully gutted critical anti-redlining protections. It would have further eroded investment in and lending to low-income communities and communities of color. As we’ve argued from the beginning, rescinding the 2020 rule is necessary to prevent real harms and pave the way for modernizing the CRA in a way that advances equity instead of impeding it. We’ll continue our work with NCRC and CRC to ensure the OCC follows the law and fulfills the purpose of the CRA.”
The National Community Reinvestment Coalition and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business. NCRC was formed in 1990 by national, regional and local organizations to increase the flow of private capital into traditionally underserved communities. NCRC has grown into an association of more than 600 community-based organizations in 42 states that promote access to basic banking services, affordable housing, entrepreneurship, job creation and vibrant communities for America’s working families. More: www.ncrc.org
The California Reinvestment Coalition (CRC) is the largest statewide community reinvestment coalition in the country, with over 300 member organizations across California that provide services to tens of thousands of Californians. CRC members include affordable housing developers, community development financial institutions, housing counseling agencies, small business technical assistance providers, legal services agencies, and community-based organizations.
Democracy Forward is a nonprofit legal organization founded in 2017 to litigate challenges to unlawful executive branch action on behalf of organizations, individuals, and municipalities. The organization has taken 650 legal actions and reversed dozens of harmful policies. Democracy Forward is expanding its work, building on its success to confront unlawful threats to democracy and social progress.
Megan J. Uzzell