WASHINGTON - Legislation that would essentially pare the Community Reinvestment Act to a simple disclosure form has been introduced by a key House Banking Committee Republican.
The measure, sponsored by Rep. Bill McCollum of Florida, would reduce the 1977 reinvestment law to a requirement that banks disclose in their lobbies how they are complying with the reinvestment law. However, to encourage banks to lend in low-income neighborhoods, it would also add redlining to the list of impermissible activities under the Equal Credit Opportunity Act and the Fair Housing Act.
"This bill will eliminate credit allocation by the federal bank regulators," Rep. McCollum said on the House floor last week. "It is tough on lenders that redline neighborhoods. Yet it is fair, by removing costly and unnecessary burdens from financial institutions."
Nevertheless, the bill has raised serious concerns among community groups. The measure would limit the Justice Department's ability to bring fair-lending cases only to those cases that are referred by an institution's primary regulator.
"It would be an absolute disaster," said John P. Relman, director of the Fair Housing Project at Washington Lawyers' Committee for Civil Rights. "The federal regulatory agencies are way, way behind the curve when it comes to fair-lending investigations. Justice has been both effective and aggressive in this area."
Karen Shaw, president of ISD/Shaw Inc., added that loan discrimination "happens in contexts that the banking regulators just don't see."
Allen Fishbein, general counsel at the Center for Community Change, took issue with a provision in the McCollum bill that would bar regulators from halting bank mergers, acquisitions, and branch openings because of poor CRA ratings.
"It takes away any potential sanctions in CRA, so the law would become toothless," Mr. Fishbein said. "It would be a return to the sorry and shameful era when banks could redline and discriminate with impunity."
Mr. Fishbein added that the McCollum bill may be an effort to add momentum to another measure, introduced by Rep. Doug Bereuter. Provisions in the Nebraska Republican's regulatory relief bill would, among other things, exempt from the reinvestment law banks with assets under $100,000 in towns of less than 30,000 people.
"In some ways the McCollum bill seems like a stalking-horse," Mr. Fishbein said. "He may be trying to stake out the most radical ground on this issue to make the Bereuter provisions seem moderate."
Ms. Shaw concurred with Mr. Fishbein.
"I think this is more a statement of position than an attempt to get this enacted," Ms. Shaw said.
However, bank lobbyists gave the McCollum legislation good odds for passage.
"I wouldn't discount this legislation," said Ron Ence, director of legislative affairs for the Independent Bankers Association of America. "Bill McCollum is a highly respected member of the majority, he's second ranking on House Banking - he does not do things frivolously."
Banking regulators and community groups alike have asked lawmakers not to pursue legislation that would tinker with the newly revised CRA rules, which federal banking agencies finalized in April.
