WASHINGTON Consumer groups are complaining that proposed changes to the Community Reinvestment Act are too timid.
The proposals follow three years of nationwide public hearings on the subject. The groups are criticizing regulators for their March proposal, which was designed to give more CRA credit for out-of-market community development projects, saying it does not keep pace with the modern era of banking.
“It may be helpful in the area of community development financing,” Joshua Silver, vice president of research and policy of the National Community Reinvestment Coalition, told Credit Union Journal sister publication American Banker in an interview. “But it is not helpful in completely capturing the whole range of activities of a bank in making sure its activities are safe and sound and it effectively reaches low- and moderate-income people.”
Those defending the regulators’ approach are arguing that they have to move incrementally, and warning that expanding boundaries too far would have unforeseen consequences.
“This is a cautious first step,” Ellen Seidman, a former director of the Office of Thrift Supervision who now chairs the Center for Financial Services Innovation, said in an interview. “The way they are going about trying to get banks to look beyond their assessment area to look into really underserved areas is a better way of doing it than proliferating assessment areas.”
Beyond the political debate over whether CRA with its overarching goal of meeting credit needs of low- and moderate-income members in a bank’s local community helped fuel the lending crash are periodic efforts by policymakers to revise the law’s real-world application in the face of a dynamic financial services sphere.
Almost three years ago, federal bank regulators held a series of hearings around the country on ways to improve CRA supervision. Their proposal in March was one of the first concrete steps taken out of those meetings, and suggested revisions to a question-and-answer document used as primary guidance for the law’s implementation.
Silver said many community-focused groups were disappointed in the narrow focus of the proposal compared to the interest regulators showed in the subject through the hearings.
