The FDIC is taking the 'community' out of CRA enforcement

Nathan Howard/Bloomberg

The Community Reinvestment Act regulation has been the subject of litigation, modernization and now reversion to the status quo. But the Federal Deposit Insurance Corp., with little fanfare or scrutiny, is now poised to remove the original enforcement mechanism of the CRA: that a bank's CRA performance be considered when it applies to open a branch (or, as the Act has it, "deposit facility").

With a comment period set to expire on Sept. 16, the FDIC proposes to eliminate any requirement for public notice of application and new branches, and thereby any public comment. Proposal for new branches, submitted in letter form, would be deemed automatically approved three days after submission.

There is a major problem with this change: Eliminating public notice and comment, by regulation, runs counter to the CRA statute which provides that the regulator(s) shall take a bank's CRA "record into account in its evaluation of an application for a deposit facility by such institution."

Clearly, the FDIC would still be required to comply with the statute and "take into account" a bank's CRA record on its branch application. But in only three days? And with the community excluded from this Community Reinvestment Act consideration?

The FDIC is relying on the fact that while the Bank Merger Act and the Change in Bank Control Act directly require public notice of applications, Section 18(d)(1) of the Federal Deposit Insurance Act does not specify public notice.

OCC

OCC: 'debanking' will factor into CRA, license applications

The Office of the Comptroller of the Currency said in a bulletin to banks that it will consider whether firms engaged in "politicized or unlawful debanking" when considering bank's licensing applications and Community Reinvestment Act reviews.

By Ebrima Santos Sanneh

September 8

If on such applications for branches the FDIC must consider the Community Reinvestment Act, how can this be meaningful without notice to the community, and comment from the community, and all within three days?

These are questions the FDIC must answer. But while my organization, Fair Finance Watch  — alongside its comments on the proposed regulatory change — filed timely comments on several pending branch applications, citing 2024 Home Mortgage Disclosure Act data not considered in any of the banks' most recent CRA performance evaluation, days later the FDIC had not even confirmed receipt.

It seems the FDIC is trying to take the lead in deregulation. But taking the community out of the Community Reinvestment Act, which must be considered on applications for deposit facilities, is not the way to do it.