On December 12, 2019 the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) announced a proposal to modernize the regulations under the Community Reinvestment Act (CRA) that have not been substantively updated for nearly 25 years.

The proposed rules are intended to increase bank activity in low- and moderate-income communities where there is significant need for credit, more responsible lending, greater access to banking services, and improvements to critical infrastructure. The proposals will clarify what qualifies for credit under the CRA, enabling banks and their partners to better implement reinvestment and other activities that can benefit communities. The agencies will also create an additional definition of “assessment areas” tied to where deposits are located—ensuring that banks provide loans and other services to low- and moderate-income persons in those areas.

Because the banking industry has changed dramatically since the law’s enactment and its regulatory changes in 1995, the current CRA framework has not kept pace with such changes, which can adversely affect the very communities the CRA was intended to help. The proposed rules announced today are intended to address digital banking changes and to further encourage lending to low- and moderate- income borrowers living in underserved communities, such as rural areas and tribal lands far removed from urban centers where bank branches are concentrated.

Conspicuously absent from this rulemaking is the Federal Reserve Board (FRB). The OCC has been bulling this proposal through the process. The advanced notice of proposed rulemaking was published by the OCC without participation from the FRB or the FDIC. The FDIC signed on the proposal at the last minute. This process would be more palatable if all of the agencies were fully involved.

The 240-page proposal is on a fast track. Comments will be accepted for 60 days after publication in the Federal Register, which is expected soon.