As the Financial Accounting Standards Board prepares to vote this week on a delay of the CECL accounting standard for certain companies, the Center for Responsible Lending on Friday warned that the standard could seriously affect credit availability to low- and moderate-income borrowers. CRL called for a pause in CECL’s implementation to allow for a full economic impact study of the standard.
“As proposed, CECL creates a significant disincentive for lenders to originate loans to low- and moderate-income families and communities of color, since the up-front charge will be relatively large than for ‘prime’ loans, even when the lender charges an interest rate that will fully cover the expected risk of loss,” said CRL President Mike Calhoun. “This problem is particularly acute for long-term assets like mortgages.”
ABA has long warned of the procyclical nature of CECL and its potential to curtail consumers’ access to credit. In previous comments to FASB, ABA called for a “full, indefinite delay” of CECL for all companies, and the association continues to advocate for a quantitative impact study.