The Office of the Comptroller of the Currency (OCC) said Tuesday it will rescind its Trump-era revamp of the Community Reinvestment Act (CRA) and committed to joining the Federal Reserve and Federal Deposit Insurance Corp. (FDIC) in issuing interagency rulemaking aimed at modernizing the 1977 anti-redlining rule.
The bank regulator published a final rule last year, overhauling the agency's regulations under CRA without the backing of its fellow regulators, a controversial move that was met with pushback from community groups and Democratic lawmakers.
- Tuesday’s announcement follows the completion of a review by Acting Comptroller Michael Hsu, who took over in May. Since taking the helm, Hsu has signaled a change in direction for the agency, which also includes seeking more interagency coordination when it comes to chartering fintechs and cryptocurrency firms.
"To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized," Hsu said in a statement. "While the OCC deserves credit for taking action to modernize the CRA through adoption of the 2020 rule, upon review I believe it was a false start. This is why we will propose rescinding it and facilitating an orderly transition to a new rule. I look forward to working with the other agencies to develop a joint Notice of Proposed Rulemaking and building on the ANPR proposed by the Board in September 2020."
The effort to revamp the CRA, which requires banks to show how they invest in low-income areas, was a top priority for former Comptroller Joseph Otting, who released the 372-page overhaul to the rule just ahead of his resignation last year.
Otting said the more than 40-year-old rule needed to reflect the modern banking sector, which has seen a significant decline in physical branches as more consumers choose to engage with their banks digitally.
The revamp, however, drew flak for being overly reliant on a single test score, and for the weight it gives to the amount banks invest in lower-income areas. For example, a bank could be compliant through a few large projects rather than its work in small-dollar lending to residents and small businesses.
Trade groups and industry stakeholders also took issue with the speed in which the rule was issued.
The OCC's release of the rule in May 2020 was finalized just six weeks after the public comment period closed, leaving doubt as to how much feedback was actually considered.
Bank trade groups, who have long agreed the rule is in need of modernization, also expressed concern with the OCC’s lack of lock-step with fellow regulators amid the revamp.
"This is an awkward, disjointed and rushed move by a single agency that couldn't get agreement from the two other agencies that regulate banks within the same administration," Jesse Van Tol, CEO of the National Community Reinvestment Coalition, said in a statement last year.
Tuesday’s announcement that a joint ruling was in the works was welcomed by the Consumer Bankers Association (CBA).
"It is well past time for federal regulators to finally demonstrate responsible government by modernizing CRA for the first time in over two decades. Any modernized CRA rule should be transparent, flexible and consistent across regulators to ensure banks are able to optimize support for the communities they serve," CBA President and CEO Richard Hunt said in a statement Tuesday. "We once again commend the OCC for bringing this issue to the forefront in an effort to modernize this antiquated law, and we look forward to working collaboratively with the OCC, FDIC, and Federal Reserve to modernize the CRA through a joint rulemaking."