Three broad areas in focus on review of CRA rules – but timeline now a bit more murky

Federal banking regulators are focusing on three areas for proposing reform of rules implementing anti-redlining laws – but one of those regulators walked back a timeline Tuesday as to when those reform proposals will surface publicly.

In a speech to a gathering of the Community Development Bankers Association in Washington, Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams outlined the three areas regulators are looking at to propose reform of rules implementing the Community Reinvestment Act (CRA).

However, she stepped back from comments she made in a press conference just last week, when she said a discussion draft of the proposal would be circulated among the agencies (including the FDIC, Federal Reserve and Office of the Comptroller of the Currency [OCC]) within the “next week or so” and that a proposal would be coming as early as this summer.

“I hesitate to put a timeline on this process, but I will say this continues to be a priority for the FDIC,” McWilliams said, referring to meetings among the three banking regulators. She called those meetings productive as principals from the three agencies “have been meeting regularly for a number of weeks to see if we can come to a broad agreement on a set of priorities for CRA reform.”

McWilliams told the group that, based on review of comments received last year by the OCC in the wake of that agency’s call for comments on reforming the CRA rules, the agencies are focusing on three areas in their reform proposal discussions:

  • Clarifying what activities qualify for CRA credit, as institutions “are more likely to make community investments when they are confident that these investments will qualify for CRA credit.”
  • Reviewing how the agencies assess lending – including digital lending – by banks outside of the area where their main offices and branches are located.
  • Working to ensure that CRA investments target those most in need in a bank’s community.

“I know that you have a particular interest in how larger banks may be evaluated for CRA purposes with respect to potential partnerships with CDFIs (community development financial institutions),” she told the group. “There were a lot of comments on that issue, and I am sure it will be part of the discussions that take place.”

In other remarks, McWilliams told the community development bankers it continues to sift through comments it received on small-dollar credit products, gathered through a public request for information (RFI) issued last fall.

“We gathered a lot of valuable information through this process, particularly about how banks structure their small-dollar credit products, how they underwrite those loans, and how they use technology to service them,” she said. “We are using the feedback we received to formulate guidance that can help institutions develop small-dollar loan programs that meet their business needs and are safe, accessible, and understandable to consumers.” She added that the agency is working with the Federal Reserve and OCC in “a joint effort on this topic.”

Remarks by Jelena McWilliams Chairman Federal Deposit Insurance Corporation at the Community Development Bankers Association Peer Forum and Membership Meeting