The Federal Reserve Board has advised limited-purpose credit card banks that they can meet their Community Reinvestment Act obligations by providing community development services and investments.
In a Sept. 6 letter to the Association for Financial Services Holding Companies, Fed Assistant General Counsel Robert de V. Frierson wrote that these institutions may invest in community development companies, provided they don't control more than 5% of the voting stock. They may also lend senior executives to community development groups and make grants to housing activists, he said.
These credit card banks, created by the Competitive Equality Banking Act of 1987, are only allowed to make consumer credit card loans. Patrick Forte, president of the holding company group, said his members were unsure how to comply with both laws simultaneously.
"This provides some better insight for management running these companies," he said. "They can now know what they can invest in safely to comply with the Community Reinvestment Act."