Financial Services Committee Looks to Reverse Ruling to CRA

Maxine Waters, Chairwoman of the House Financial Services Committee, introduced a Congressional Review Act resolution to reverse the recent modifications to the Community Reinvestment Act (CRA). 

Waters said the former Comptroller of the Currency of the Office of the Comptroller of the Currency (OCC) Joseph Otting “rushed out a harmful rule gutting the Community Reinvestment Act.” 

“Otting recklessly pushed ahead with his rule, which will result in disinvestment in many low- and moderate-income communities, despite the Federal Reserve and the FDIC—the other regulatory agencies responsible for enforcing CRA—declining to join in the rulemaking,” Waters said. 

She added that the CRA is an “essential law” put in place to prevent redlining and to require banks to invest and responsibly lend in certain communities. 

“It is completely unacceptable for the OCC to use the cover of a pandemic to rush out a rule that will be harmful to communities that are already suffering during this crisis. This resolution we introduced today will right that wrong,” she said. 

Joining Waters in her protest is Congressman and Committee member Gregory Meeks. He added that the CRA “must remain true to the law’s civil rights roots.” 

“My office conducted and published an extensive study of bank branch distribution in Queens, finding that predominantly black and Hispanic zip codes have seven times fewer bank branches than non-minority zip codes, even when adjusting for income,” he said. “The Financial Services Committee has held a series of hearings on modern-day redlining, and the critical need for a stronger CRA, supported by methodical data analysis, and reflecting the recommendations of community organizations. 

“Comptroller Otting and the OCC have failed systematically to achieve this, and put forward a rushed, incomplete rule that will harm the very communities the CRA is meant to support.”

Bryan Hubbard, a spokesperson for the OCC, said since the Community Reinvestment Act was last updated in 1995, racial wealth disparities have increased; minority homeownership, particularly for African-Americans, is virtually unchanged; and banks have closed thousands of branches leaving many low- and moderate-income communities and communities of color without basic banking services.

"The OCC’s CRA update addresses the failings of the past 25 years by inducing banks to lend and invest even in communities where they pulled out their branches, by giving credit for every dollar of mortgage originations to LMI individuals, and by creating benefits for people who were left out of the old system, such as people in farm country, people with disabilities, and Native Americans. We achieved this result through a 2 ½-year process in which we incorporated good ideas from community and civil rights groups, banks both large and small, and other stakeholders.  As Harry Truman once said, it is amazing what you can accomplish if you don’t care who gets the credit," he said.

The OCC, and former-Comptroller Otting, presented the Committee with the final rule during a May hearing. The rule was aimed to increase bank CRA-related lending, investment, and services in low- and moderate-income communities where there is a significant need for credit, more responsible lending, and greater access to banking services. 

The final rule reflects careful consideration of the more than 7,500 comments stakeholders submitted in response to the notice of proposed rulemaking announced on December 12, 2019. The OCC made several changes to the proposal that respond to stakeholders’ comments, including:

• Clarifying the importance of the quantity and quality of activities as well as their value.
• Increasing credit for mortgage origination to promote availability of affordable housing in low- and moderate-income areas.
• Clarifying credit for athletic facilities to ensure they benefit and support low- and moderate-income communities.
• Deferring establishment of thresholds for grading banks’ CRA performance and delineating banks’ deposit-based assessment areas until the OCC assesses improved data required by the final rule.

During a January hearing, Meeks noted there is still evidence of discrimination in lending—something the CRA was meant to solve. 

“Your proposal decouples CRA from outcomes for intended communities, discounts the value of direct lending in mortgages to low and moderate-income communities and communities of color, cuts out community organizations that work directly with these targeted communities, and is just not supported by data,” Meeks said.