Federal bank regulators' efforts to modernize the 45-year-old law known as the Community Reinvestment Act to reflect the rise of digital banking are raising accusations of partisanship, a claim that those digging into the details say is likely unfounded.
The Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation are reviewing comments on a proposal this year to update the CRA rules for the first time in nearly 30 years. And just like a previous attempt under Republican President Donald Trump, this one is drawing complaints about a partisan process.
Some financial industry watchers say the divide is likely to unfairly cloud the rule-making.
Congressional Democrats welcomed the joint plan, seeing a vast improvement over rules adopted by the OCC alone during the Trump administration that Democrats said weakened civil rights protections. The Biden administration reversed those rules last year. This time, congressional Republicans suspect a move to advance liberal political and economic policies.
Some experts say the disagreements don't appear rooted in the agencies' plan to update the rules to reflect the technology-driven transformation of the industry as mobile, online and branchless banking expands. Such innovation allows banks to do business beyond the boundaries of the communities where they are physically located.
Sanford M. Brown, a former OCC official who's now a partner in Dallas with the law firm Alston & Bird LLP, where he is co-chair of the financial services and products practice group, said the partisan reactions demonstrate “one of the things that are wrong in Washington these days.”
Brown said the OCC’s proposal “was floated from an agency with a single head who was appointed by a Republican president; therefore, it was automatically ‘bad’ in the opinion of the Democrats.” Similarly, the proposal under review “since the banking agencies are now run by people who were appointed by a Democratic President, the Republicans in Congress automatically assume the proposal is ‘bad,'" he said.
The CRA is a 1977 law aimed at ensuring that banks provide credit to the communities in which they do business, including to low- and moderate-income neighborhoods. The law seeks to address lending discrimination known as "redlining" against low- to middle-income families and minority neighborhoods.
Banking agencies regularly assess whether banks are complying with CRA obligations.