OCC Drops Trump-Era CRA Reform


The years-long effort to update the Community Reinvestment Act will continue, this time with the three federal banking regulators working together, a move supported by both banks and community organizations.

The Office of the Comptroller of the Currency said in a statement Tuesday that it would propose rescinding the CRA rule that it had issued last year, instead working with the Federal Reserve Board and the Federal Deposit Insurance Corporation on a joint rule to update the CRA.

The OCC had announced in May that it was reconsidering the OCC’s 2020 CRA regulations.

“While the OCC deserves credit for taking action to modernize the CRA through adoption of the 2020 rule, upon review I believe it was a false start,” Acting Comptroller of the Currency Michael Hsu said in Tuesday’s statement. “This is why we will propose rescinding it and facilitating an orderly transition to a new rule.”

Adopted in 1977, the CRA had not been revamped since 1995. The regulations encourage financial institutions to meet community credit needs, including in low- and moderate-income neighborhoods, and prevent discrimination through redlining.

The OCC in 2018 had first issued plans to update the CRA and released its final proposal in late 2019. Despite efforts to have all three regulators agree on joint regulations, only the FDIC supported the 2019 proposal. When the OCC finalized the new CRA rules in May 2020, the FDIC dropped its support, citing concerns about the pandemic. The OCC’s final regulations did not include benchmarks for measuring banks.

The Federal Reserve continued to work on its own updates for the CRA, releasing in September 2020 an advanced notice of proposed rulemaking.

In a separate statement Tuesday, the OCC, Federal Reserve and FDIC said they are committed to working together on the regulations.

“The agencies have broad authority and responsibility for implementing the CRA,” the statement said. “Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.”

In the OCC’s statement, Hsu said the joint initiative would build on the Federal Reserve’s proposal from last September. He added that the disproportionate effects of the pandemic on low- and moderate-income communities have highlighted the importance of a joint effort to strengthen the CRA.

The OCC’s 2020 regulations had been opposed by organizations that work with low- and moderate-income communities and by banks.

The National Community Reinvestment Coalition had sued the OCC over the new CRA rules and said in a statement that the decision by the bank regulators to work together on CRA was “a huge victory for NCRC and all our members and allies who challenged the 2020 rules, submitted comments and helped spread the word in the middle of a historic pandemic.”

“The 2020 CRA rules set by the OCC were a mess, a regulatory failure, and a transparent attempt to weaken the law and make it less effective by easing up on requirements for banks to meet the credit needs of all the communities where they do business,” the NCRC said, adding: “CRA compliance rules are technical, complex and off the radar for most people, but they influence trillions of dollars in local lending for mortgages and small businesses.”

Rob Nichols, president and CEO of the American Bankers Association, said in a statement that the trade group welcomed the OCC’s proposal to rescind the rules.

“We firmly believe that there is a need to update and modernize the CRA rules to reflect today’s modern banking system and the needs of communities, but those rules must be consistent across all of the banking agencies,” Nichols said. “By proposing to rescind the OCC’s 2020 rule and announcing a commitment to develop a joint rulemaking involving all of the banking regulators, there is a new opportunity to craft a single set of rules for banks to follow. We look forward to working with the agencies and other stakeholders to achieve our shared goals of increasing investment and economic opportunity in neighborhoods across the nation.”