Capital Brief: Guide Coming for Web Banks' CRA Duties

Federal regulators could issue guidance as early as next month on how to apply the Community Reinvestment Act to banks and thrifts that operate mainly on the Internet.

After months of discussion, an interagency task force of CRA experts is readying a revised question-and-answer document that will clarify the agencies' policies on a variety of CRA issues, including the treatment of Internet banks. The group will continue its dialogue at a meeting today and again next week.

Internet banks usually have headquarters but no branches, delivering services nationwide via computer. As such, they have been a challenge for regulators accustomed to imposing CRA requirements on brick-and-mortar branches.

The few cases resolved so far have been handled on a case-by-case basis. Typically, regulators have required Internet banks to meet the needs of only the communities surrounding their headquarters.

The revised guidance will also address how CRA will be applied to thrifts that deliver services through a parent company's insurance agencies. CRA agreements such as the one recently reached between State Farm Mutual Automobile Insurance Co. and the Office of Thrift Supervision will provide precedents for those drafting the guidance but will not necessarily bind them, a task force member said.

In addition, the CRA guidance will address the ability of lenders to include refinancings and renewals in their small-business reports. Some banks claim that the most recent CRA guidance, issued in October 1997, did not adequately describe the difference between refinancings and renewals.