Federal Regulators Nearing Consensus on CRA and Small-Dollar Lending

Jun 4, 2019Federal Regulation, News

Late last week, Jelena McWilliams, chairman of the Federal Deposit Insurance Corporation (FDIC) indicated that federal regulators would soon propose changes to the Community Reinvestment Act (CRA) and small-dollar lending policies.

CRA governs how depository institutions serve the needs of low- and moderate-income communities. Although CRA reform has been a topic of discussion for years, it has not been significantly updated since the 1990s.

The Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the FDIC jointly monitor compliance with CRA. Thus far, only the OCC has taken action when it issued an advance notice of proposed rulemaking last November that received 1,500 comments.

According to the American Banker, the three federal regulators are in general agreement on CRA reform, “including the need to develop clearer measurements of banks’ community lending efforts and to revisit CRA assessment boundaries in light of digital banking and other changes.”

Chairman McWilliams stated last week that the federal agencies are working together on CRA reform and are hoping to issue a notice of proposed rulemaking in several months.

In regards to small-dollar lending, Chairman McWilliams implied that federal regulators are currently not in agreement on how to proceed. “I can’t speak on the specifics because we need to be in agreement with the other agencies,” said McWilliams.

The FDIC has solicited comments late last year, but has yet to take affirmative action that would make it easier for banks to issue small-dollar loans. In contrast, the OCC reversed a 2013 Obama administration directive that instructed banks to avoid such loans. Comptroller Joseph Otting has also encouraged banks to explore this space.

Despite not being in agreement right now, “There is generally an agreement we should proceed together,” said McWilliams. “We shouldn’t have three separate approaches as to how our institutions are looking at small-dollar and I’m still hopeful that we’ll be able to come to the finish line altogether in some kind of a joint effort.”

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