Community activists have long been frustrated by the prudential regulatory agencies' apparent reluctance to enforce the Community Reinvestment Act, fair lending laws and consumer protection laws. But right now, at the highest levels of these agencies, which include the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, there appears to be a new sensitivity to the needs of low- and moderate- income communities and a heightened focus on creating a more equitable financial marketplace.
This is highly welcome news. The fact that Congress saw the need to create a new agency with the specific mandate to protect consumers – the Consumer Financial Protection Bureau – and then legislatively stripped the prudential regulators from having primary rulemaking and enforcement authority over consumer protection laws, speaks volumes about the past failures of the prudential regulators. Many oversight responsibilities were shifted to the CFPB, which has done an admirable job with those responsibilities.
Under Director Richard Cordray, the CFPB has moved decisively to issue multimillion-dollar penalties against big institutions for deceptive practices and has created long-needed standards for servicers, auto lenders and others. The bureau has also defined the parameters for what constitutes a safe and sound mortgage, with the qualified mortgage rule. The lending industry has quickly learned that there is a new sheriff in town when it comes to protecting consumer rights.
Many community leaders lamented the fact that not all of the fair lending laws were transferred from the prudential regulators to the CFPB. Notably, the Community Reinvestment Act and the Fair Housing Act remained under the purview of the prudential regulators. But here, too, there is now reason for optimism. At the highest levels of the prudential regulatory agencies there appears to be a new level of sensitivity to the importance of CRA and fair lending.
The head of the OCC, Thomas Curry, built an impressive track record in Massachusetts as Commissioner of Banks that demonstrates his clear commitment to fair and equal access to credit for all creditworthy borrowers. On March 20, at the National Community Reinvestment Coalition's Annual Conference, Curry stated "… it is critical for the OCC to continue working hard to ensure that CRA remains an effective, sustainable tool for community progress."
Additionally, at the FDIC, Chairman Martin Gruenberg has a long and impressive history of promoting fair and equal access to credit and capital, starting with his work in the Bronx and continuing with his work for the great Sen. Paul Sarbanes. And finally, there is the Federal Reserve, where Board Governors Janet Yellen, Elizabeth Duke and Sarah Bloom Raskin have all spoken out against unfair lending practices.
Raskin also delivered remarks at the NCRC's 2013 annual conference, and spoke at length about the needs of low- and moderate-income communities. In her remarks, she evoked the "broken window theory" in the area of financial regulation, and noted " … federal regulators must listen carefully to community input and analysis in order to keep track of where windows are breaking and how they are being broken." This is precisely the approach that is needed at the regulatory agencies – one that is receptive to the concerns of communities and cognizant of their needs.
The sea change of bank regulatory oversight goes well beyond the new and highly effective CFPB. The sensitivity now present at the highest levels of the Federal Reserve, OCC and FDIC offers great promise to small businesses and consumers looking to acquire safe, fair and responsible loans from our banking industry. This is good news for borrowers and for those working to accelerate our nation's economic recovery.
John Taylor is president and CEO of the National Community Reinvestment Coalition.