To reduce down on time-consuming protests, regulators have begun soliciting comments from local activists at the start of Community Reinvestment Act exams.
The Office of the Comptroller of the Currency is the most aggressive of the agencies, but examiners at the Federal Reserve Board and the Federal Deposit Insurance Corp. also are meeting with community leaders.
"This helps us identify and do what we can to address in an exam a community's concerns," said J. Christopher Lewis, the OCC's special adviser for external affairs. "They don't lie unaddressed and fester," leaving the community with no avenue but protest.
The agencies spent three years rewriting CRA rules to shift their focus from paperwork to performance. To reduce reporting requirements, examiners now evaluate loan demand in each bank's community by meeting with local leaders. The revised rules kicked in for small banks in January 1996; large banks start complying in July.
The outreach by regulators has unearthed some harsh criticism. The Association of Community Organizations for Reform Now, for example, charged at a meeting with OCC examiners last week in St. Louis that Mercantile Bank ignores minority neighborhoods.
"We believe that Mercantile intentionally violates the Community Reinvestment Act by not serving the Afro-American community with conventional fixed-rate home mortgages," Rose Palmer, a member of Acorn's banking committee, said in a statement prepared for delivery at the meeting with examiners.
Ms. Palmer urged the OCC to give the bank a "substantial noncompliance" CRA grade and to refer it to the Department of Justice for fair-lending violations.
Dean Keyes, vice president for community investments at Mercantile Bancorp., criticized the new process. Acorn's charges, Ms. Keyes said, are unfair and resulted in bad publicity.
"This bank is a very aggressive affordable-mortgage lender," she said. "We have a lot of education programs in place. We have account executives who take applications all over town."
Lawyers, however, said banks have little to fear.
"At best, community group comments are an indication that examiners should look further in the bank's record," New York lawyer Warren Traiger said. "But in and of itself an allegation is not enough to undermine a good CRA performance."