Yesterday, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) released a proposal to make changes to the Community Reinvestment Act (CRA).
After enacting the Fair Housing Act and the Equal Credit Opportunity Act, Congress passed the CRA in response to discriminatory redlining practices that excluded certain communities from the financial marketplace.The purpose of the CRA is to make sure that banks provide safe and affordable credit to communities of color and other underserved areas. By requiring banks to meet the credit needs of the communities where they do business, the CRA has played a crucial role in increasing investment in low and moderate income (LMI) neighborhoods and making credit available to families of color for the past 40 years.
Contrary to the mission of CRA, the FDIC/OCC proposal makes it easier for banks to ignore the variety of credit needs in the communities they serve, and leave them further behind. Over the opposition of civil rights, consumer advocacy, and community groups, the proposal incorporates the OCC’s deeply problematic “one-ratio” metric, which reduces the CRA exam to a single numerical benchmark. By adopting a one-size fits all approach, the one ratio lowers the bar for compliance and reduces community input in the process. Under this proposal, banks can now decide to make only a few select profitable investments to meet their CRA requirements while excluding other underserved areas, including neighborhoods of color.
“Ten years after the foreclosure crisis, black homeownership is at a record low, and families of color and minority-owned businesses are often unable to access the affordable credit they need to build their pathway to the American Dream,” said Linda Jun, senior policy counsel at Americans for Financial Reform Education Fund. “At a time when the racial wealth gap is growing, we are disappointed that the FDIC and OCC have chosen to propose changes to the CRA that have the potential to reduce sustainable lending in the very communities where CRA was meant to address longstanding injustices.