Banking Agencies Plan to Undo Changes to the CRA

The OCC, the FRB and the FDIC intend to rescind a 2023 final rule that created a new framework for the implementation of the Community Reinvestment Act ("CRA").

In a joint statement, the banking agencies said they intend "to reinstate the CRA framework that existed prior to the October 2023 final rule." 

The final rule covered the origination and purchase of home mortgage loans, multifamily loans, small business loans and small farm loans and automobile lending. It applied to community development loans, investments and services under various tests. The rule also classified (i) large banks as those with assets of at least $2 billion over the prior two calendar years, (ii) intermediate banks as those with assets of at least $600 million and (iii) small banks as those with lesser assets. (See previous coverage.)

Under the final rule, the framework:

• expanded "access to credit, investment and basic banking services in low- and moderate-income [("LMI")] communities through promotion of community engagement and financial inclusion, with an emphasis on smaller value loans and investments;

• provide[d] for banks to be evaluated in locations where they do not have a physical branch given the use of online and mobile banking and branchless banking;"

• provided a "metrics-based approach to retail lending and community development financing evaluations" with a specific focus on LMI, underserved and rural communities;

• gave "smaller banks the option to continue to be evaluated under the former framework or use the new proposed modified framework; and

• maintain[ed] a unified approach to regulation" among the issuing agencies and implement extensive feedback from stakeholders and market participants.

The final rule had detractors when it was proposed and when it was adopted, who argued that the rule would add unnecessary complexity and regulatory burdens without producing measurable benefits to economic growth. (See e.g. here and here.)