ORGANIZATION COMMENT LETTER
(DATE)
To: OCC, Ms. Vonda J. Eanes
Director for CRA and Fair Lending Policy Compliance
Office of the Comptroller of the Currency
400 7th Street SW, Washington, DC 20219
Re: Docket ID OCC-2018-0008
Dear Ms. Eanes:
(Organization name) opposes the Notice of Proposed Rulemaking (NPR) released by the Office of the Comptroller of Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) on December 12th regarding the Community Reinvestment Act (CRA).
(INSERT Background information about your organization and the LMI populations you serve)
(INSERT information about the kinds of programs that CRA-motivated grants or loans from banks allow your organization to provide to LMI populations)
The CRA was a landmark response to redlining, a persistent pattern of discrimination in bank lending that particularly harmed communities of color. Unfortunately, these practices continue today. In an economy that is characterized by enormous disparities in wealth that correlate strongly to race, ethnicity and geography, the CRA should be modernized in ways that places greater focus on the needs and opportunities of low- and moderate-income (LMI) people, and communities that face persistent poverty. The approach detailed in the NPR will do the opposite by lowering the bar for banks to meet their community reinvestment requirements. This NPR is fatally flawed because the content, if implemented in a final rule, will undermine the original intent of CRA, and because the manner in which the OCC has gone about the rulemaking process has undermined the credibility of the agency on the issue of CRA modernization.
The following are some of our biggest concerns with the NPR’s content:
- The NPR proposes to reduce all CRA investments to a dollar value and to calculate a single ratio of the assigned dollar value of CRA investments divided by retail domestic deposits. By reducing all investments to a dollar value, it will make it harder to measure the quality or impact of CRA investments and, as a result, whether banks are equitably serving all communities. Relying heavily on a single ratio for the rating also creates an opportunity and incentive for banks to “game the system” by making the easiest, lowest cost investments that technically qualify, regardless of their impact.
- The NPR proposes to allow banks to fail almost half of their assessment areas and still receive a high rating based on the bank’s overall “one ratio” score. Banks typically have the most difficulty meeting their community reinvestment requirements in small urban and rural areas. If banks can still achieve a high rating without meeting the credit needs in these harder to serve communities, we are concerned that small urban and rural communities will see significantly less CRA investment.
- The NPR dramatically expands the range of what activities are eligible for CRA credit, including investments that do not serve LMI people, including renovations to certain professional football stadiums. The result will be to reduce the focus on investments that serve LMI populations and neighborhoods.
- The NPR proposes to give “double credit” to banks to incentive certain kinds of investments over others. This will allow banks to significantly reduce the real dollar amounts actually invested in LMI communities while receiving the same amount of credit for the purposes of their exam.
- We are also concerned that the NPR limits the extent to which public comments will contribute to CRA rating process.
The following are some of factors in the rule making process that have undermined the OCC’s credibility with respect to CRA modernization.
- The OCC has disregarded public comments received in response to the Advance Notice of Proposed Rule Making (ANPR) that was released in the fall of 2018. An overwhelming majority of respondents to the ANPR, including many from the banking industry, expressed two key concerns: first, that CRA modernization should focus on the credit needs of LMI communities; and second, that creating a “one ratio” approach to ratings was flawed. The NPR recently published by the OCC reduces focus on LMI people and communities and relies heavily on a “one ratio” approach.
- It is concerning that the OCC issued a NPR without the concurrence of the Federal Reserve. If the NPR becomes a final rule, creating two different CRA rating systems, it will result in confusion and inconsistency between banks overseen by the Federal Reserve versus the OCC – ultimately undermining the CRA.
- Finally, we are concerned that the Comptroller of the Currency, Mr. Joseph Otting, has publicly stated his intent to limit public input in the CRA rating process and, in testimony before the US Congress, has expressed skepticism about whether there is discrimination in bank lending. Prior to becoming Comptroller of the Currency, Mr. Otting served as CEO of OneWest Bank, which had a poor community reinvestment and fair lending track record.
Based on all of these concerns, we call on the OCC to withdraw this fatally flawed NPR and examine proposals detailed by Governor Brainard of the Federal Reserve as a basis for further rulemaking.
Respectfully submitted,
Read NALCAB’s Submitted Comment Letter to OCC