Ahead of a House Financial Services subcommittee hearing on the joint agency proposal to update the Community Reinvestment Act, the American Bankers Association cautioned lawmakers that certain aspects of the proposal are unlikely to accomplish the goals of regulatory modernization, and that “if not calibrated appropriately, the final rule could result in outcomes that are contrary to the agencies’ intent, particularly as it relates to expanding access to credit for residential mortgages, small-business loans and community development financing.”
ABA called for agencies to rethink one aspect of the proposal that would require large banks (which the proposal defines as those with more than $2 billion in assets) to delineate creation of “retail lending assessment areas” where the bank has concentrations of home mortgage or small-business loans where it does not have a physical presence. Among other things, ABA noted that the loan volumes that would trigger a RLAA are “not sufficiently material,” and could unintentionally incentivize banks to “curtail retail lending in locations that are incidental to the bank’s business strategy and where the bank does not actively market its loan products.”
The association further recommended that regulators rethink the proposed benchmarks and rating methodology; provide an adequate transition period once the rule is finalized; and offer additional time for the industry to provide feedback on the proposal. ABA also emphasized that credit unions and other nonbank financial firms should be subject to CRA-like requirements.