OCC to take preliminary step in CRA overhaul plan

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WASHINGTON — The Office of the Comptroller of the Currency is planning to ask for public input next week on how it crafts an overhaul of Community Reinvestment Act procedures, according to an agency spokesman.

Comptroller of the Currency Joseph Otting has been a vocal proponent of the need to overhaul the rules that the OCC — along with the Federal Reserve and Federal Deposit Insurance Corp. — use to implement the decades-old law, which requires banks to extend credit and services to low- and moderate-income customers in communities they serve.

The Treasury Department earlier this year issued a “call to action” for bank regulators to take a fresh look at its CRA rules, outlining principles such as reconsidering what constitutes a service area in an era of online deposits and expanding the types of activities that would count toward CRA compliance.

Banks are assessed periodically for their CRA compliance by their primary regulator, and are deemed to be rated as “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” Banks that are not rated as either outstanding or satisfactory may not be able to move forward with mergers or acquisitions until they are compliant, but the vast majority of banks are rated as compliant, which critics say suggests that the review process is ineffective.

Banks’ assessment areas, for example, are based on the metropolitan statistical areas in which the bank has physical branches, and does not account for online deposits or loans. Banks therefore can have a substantial market share in an area while not having any CRA obligations to low- and moderate-income customers in that area, putting them at a competitive advantage over banks that do have physical branches.

An OCC spokesman said the agency is planning to issue an advance notice of proposed rulemaking, or ANPR, by the end of August. The agency will not be joined by the Fed and FDIC in its ANPR, the spokesman said, but the agency “will be sharing comments with our fellow regulators.” Politico earlier this week reported the OCC's plan to issue a notice.

The release will not itself include any recommendations, the spokesman said, but instead will ask for public input on a range of questions related to a future proposal.

Those questions will include considering an expansion of the types of activities that would receive CRA credit; how assessment areas can be thought of more effectively; the use of “more objective metrics” for CRA compliance; and updating recordkeeping and reporting “to make it more timely and useful.”

The notice will also ask commenters to note any aspects of the current CRA framework that are effective and should remain unchanged, the spokesman said.

The spokesman said that the OCC will accept comments on the ANPR for 75 days, and expects a joint proposal to be issued sometime in February at the earliest. With a 60-day comment period after that proposal and another 60 to 90 says to compile those comments and craft a final rule, he said, a final rule is unlikely to emerge before July 2019.

The OCC has met with a number of civil rights organizations, community groups and banks, the spokesman said, and “they will see those meetings reflected in the questions,” which he said will be “directionally consistent” with the Treasury report.

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