"I think certainly it's something that we're concerned about," Van Tol said regarding community bank efforts for reform. Van Tol said he would like to see the CRA applied to more institutions and applied more rigorously. The Federal Reserve recently released data showing persistent disparities in wealth despite overall wealth rising for all races and ethnicity groups. Jesse Van Tol, COO of the National Community Reinvestment Coalition, defended the CRA and said in an interview that the "spirit" of the law is to address a widening racial wealth gap. has faced criticism for repeatedly violating consumer protection laws, leading the Office of the Comptroller of the Currency to downgrade Wells Fargo Bank NA's rating to "needs to improve" in March 2017. Sung clarified that she does, however, think the largest banks should face CRA regulations to make sure they do not "cut out communities." Wells Fargo & Co. Sung said restrictions on eligible CRA credits means the company is sometimes discouraged from giving money to some community organizations because they do not fit the law's definition of a local nonprofit. "There are plenty of small banks who can't survive unless we're addressing our community needs," Abacus President and CEO Jill Sung said in an interview. "Let's get away from lending into social engineering and lending into low-income tracts," Handke said in an interview, adding that he would like to see an "off ramp" incorporated into the CRA to exempt compliant banks from continued regulation.īut even small banks in diverse and urban areas question the value of CRA compliance, such as New York-based Abacus Federal Savings Bank, which holds $267.6 million in total assets in predominantly Chinese neighborhoods. Handke argued that CRA compliance is of little value, since his bank services a portion of northeast Kansas that has low ethnic diversity and a small variation in income. Conversely, a bank that is caught redlining can face a downgrade in its CRA rating.Īt Union State Bank of Everest, with $312.3 million in total assets, President and CEO Steven Handke said CRA regulations have forced his company to hire new compliance personnel. For example, laws that check for redlining, or denying services to a community, can sometimes rely on a firm's geographic footprint as assessed by the CRA. A bank's CRA rating, ranging from "substantial noncompliance" to "outstanding," is a major part of bank regulation a CRA downgrade has the power to slow merger deals or sink plans for new branches or business arrangements.īut over time, the CRA has become inextricably linked to other fair-lending standards like the Equal Credit Opportunity Act and the Fair Housing Act. With the Treasury recommending a review of the bill and a national bank regulator changing its guidance for examiners, industry observers have seized the opportunity for reform by starting a discussion on how best to change the CRA.īy design, the CRA sought to address underserved low- and moderate-income neighborhoods by requiring regulators to overlay a map of an institution's deposit-taking over a map of where it lends.
"I think 40 years, it's certainly time to redo it," former Comptroller of the Currency Tom Curry said in an interview. With a persistent racial wealth gap, more fair-lending laws having been enacted since the CRA's passage, and new developments in fintech, consumer advocates and industry firms say the law is long overdue for a revision.Įven those in the regulatory space agree. The Community Reinvestment Act, or CRA, turned 40 years old since President Jimmy Carter signed the bill, but the age-old debate continues over whether or not its requirements on serving low- and moderate-income neighborhoods are distorting the availability of credit.
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